The Minister of Economy, Paulo Guedes, tried to minimize this Monday the crisis created around the approval of the Budget 2021, considered by the economic team as “unenforceable”. The text approved by the Congress cut mandatory expenses to raise parliamentary amendments, creating an impasse with Congress.
For Guedes, the controversy is occurring because the government is preparing the Budget with its parliamentary base for the “first time”, according to the minister.
“In the midst of this new political articulation, for the first time the Bolsonaro government is preparing the Budget with its own parliamentary base. It is much more a team that has never played together that is starting to put the Budget on foot than anything else,” said Guedes , during live broadcast with the financial market.
The third year budget of the Jair Bolsonaro government was approved almost four months late. Guedes denied any “fight” with Congress.
“It is not a disagreement, a fight, a war. They said there was a war between the Mayor (Arthur Lira, PP-AL) with the Minister of Economy, or a war against the Senate. That is not the climate,” he said. the minister.
Guedes denied “bad faith” on the part of Congress, but he also did not announce any agreement. The minister also took a stand against the possibility of decreeing public calamity at this time, which, for him, would be signing a blank check for public spending.
“I am sure it was not bad faith. It is natural for a team that started to play together now and started to set up the budget.
The approved budget increased by 26.2 billion (to 48 billion reais) the amount allocated to parliamentary amendments. For this, it cut in this proportion the estimate of expenses such as Social Security, salary bonus and unemployment insurance, which are mandatory. The problem is that there is no evidence that this projection is confirmed.
Therefore, the government would have to cut in other areas, such as funding and investments, to guarantee the payment of pensions and pensions without breaching the rules of public accounts.
The money from the extra amendments is destined for parliamentarians from the allied base to point out works and services in their electoral bases.
However, government technicians defend the veto of President Jair Bolsonaro to the 26.2 billion reais added in parliamentary amendments to recompose mandatory spending.
Guedes admitted that there was a problem of “coordination” in the preparation of the Budget. And he acknowledged the dilemma created between vetoing and creating problems with the allied base, and not vetoing the amendments and leaving Bolsonaro subject to prosecution for breaching fiscal rules.
“If you say ‘let’s veto’, to ensure that it is legally perfect, on the one hand, on the legal side, everything is shielded. There is no possibility of exploitation by the opposition to speak of impeachment. But it is politically uncomfortable. On the other hand, if it moves forward as it is, it leaves the government exposed there in front of a possible non-approval of accounts by TCU [Tribunal de Contas da União] there next year, in the middle of an electoral campaign “, described the minister.
Asked if it would be a possibility to keep 16 billion reais for extra amendments and veto the rest, Guedes said yes.
“What is politically more convenient can be judicially inconvenient. And vice versa,” he added.
The minister reiterated that political agreements must fit within public budgets.
“It is the parliamentarians who are supporting the government who are taking their amendments to apply in that region,” said the minister, adding: “It is a complex exercise, with a lot of people involved. Now, above all, it has to be worth the concepts that allow make it happen without boring the ceiling [de gastos]”.
During his speech, Guedes erred in saying that the Budget was sent in May last year. In fact, the proposal was sent on August 31, as required by law.
In addition, he said that the parameters were out of date and justified that it would take more time for the government to submit a new proposal to update these parameters.
Administrative and tax reforms come out this year
Guedes is betting that the administrative and tax reforms will be approved in 2021, and that Congress is working for that.
“It would be very good for Brazil and very good for the government to have these reforms approved,” he declared.
The minister’s assessment is that the administrative would have faster approval. It is already more calibrated, as it will not affect current civil servants, but only sets standards for the future.
“I think it would be a very big mistake to delay this reform now for a very simple reason: the longer it stays, the tougher it will be,” said Guedes, who mentioned that there was an understanding by the Mayor, Artur Lira, that it is possible to approve the proposal in two or three months.
Regarding tax reform, Guedes also defends approval in 2021 and again highlighted the government’s proposal, which is in phases and which begins with the unification of federal taxes, opening space for the simplification of other taxes.
“Our reform is not going to create taxes, new categories of taxes, except to simplify and reduce the existing ones. Our reform is relatively simple, relatively effective and is a reform of things that you all expect,” said Guedes, who cited the reduction taxes on corporations, raise the tax on dividends and create a selective tax, which would end some taxes on industrialized products.
The minister also claimed that the reforms that are already underway in Congress are comprehensive and complex, and depend on agreements that have not yet been made with states and municipalities.
GDP returned in V
The minister also affirmed that the Brazilian economy is already showing signs of recovery, and that “it will have to go hand in hand” with health to guarantee mass and rapid vaccination and to guarantee a safe return to work and maintenance of economic activity.
“The GDP has already returned to V. What is being discussed today is whether the growth rate will be 3% or 3.5% or if the pandemic worsens, we will be slaughtered again”, he declared.
Guedes’ assessment is that this blow with the resurgence of the pandemic will be shorter and will cause a smaller drop than last year because vaccination is advancing.
“I hope that in three or four months we will have reached that critical point of herd immunization, and that the economy is already (resuming) and the safe return to work is already happening,” he said.
Guedes also commented on fiscal problems, such as taking care of the spending ceiling, which will have a more difficult year in 2021 because of the rise in inflation. But, just as the Central Bank is taking care of monetary policy, the Economy takes care of the fiscal part, working with maneuverable deficits, controlling public debt in relation to GDP and following the structural reform program.
“We will work on [relação] debt-GDP, with privatizations, and the deleveraging of public banks. The BNDES will send 100 billion reais, Caixa will make one or two privatizations and will send the funds to us as well. We are going to follow our program of structural reforms, but paying attention to the pandemic “, he said.
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