Congress approves LDO with zero deficit in 2024 – 12/19/2023 – Market

The basic text of the LDO project (Budget Guidelines Law), which creates the basis for the 2024 Budget, was approved by Congress this Tuesday (19).

Parliamentarians now need to analyze suggestions for specific changes to the approved content. Afterwards, the text will go to sanction.

The proposal foresees a zero deficit target next year, as defended by Minister Fernando Haddad (Finance). However, allies of President Luiz Inácio Lula da Silva (PT) already point out that this projection will have to be changed throughout 2024 at the risk of running out of money for public works and investments.

The approved version also has an alternative device to lock the maximum amount of contingency expenses in 2024 at R$23 billion. The mechanism was accepted by the LDO rapporteur, deputy Danilo Forte (União Brasil-CE).

Furthermore, the government obtained approval to deduct up to R$5 billion in expenses from federal state-owned companies related to the new PAC (Growth Acceleration Program) from the fiscal target.

In practice, the measure partially reduces Minister Fernando Haddad’s difficulties in bringing the primary deficit to zero next year.

The government also tried to change the part that deals with parliamentary amendments – resources sent by deputies and senators to works and projects in their electoral bases. But faced with pressure from parties, Lula’s allies retreated.

The text provides a schedule for the government to release the money from the amendments for the works and municipalities chosen by parliamentarians. The calendar was established by Congress.

Today there is no forecast of when the amendment will be authorized and, historically, governments use this as a bargaining chip in negotiations with Congress. It is common for there to be a large volume of these transfers on the eve of votes of interest to the Palácio do Planalto.

Lula’s political assistants say that this fixed deadline for releasing amendments would reduce the room for maneuver for agreements at decisive moments in the Chamber and Senate plenary.

At the beginning of July, in just two days, Lula broke records and authorized the transfer of R$7.5 billion in amendments. That week, the government was facing difficulties in being able to approve projects in the economic area and the proposal that reformulated the entire Esplanada, including the creation of new ministries.

Another measure criticized by government supporters is the article included in the 2024 LDO that stamps R$11.3 billion for commission amendments and further expands the power of the National Congress over next year’s Budget.

This increases the volume of amendments to almost R$50 billion in 2024, which would be a record.

Lula’s interlocutors say that these two points regarding amendments could be vetoed if the Palácio do Planalto assesses that there is room for this.

“There is no agreement regarding these two important issues that are in the text. Firstly, what establishes the payment schedule for amendments. The Fiscal Responsibility Law provides another direction, another guidance [sobre isso]. And in relation to setting a percentage of committee amendments. We are in favor of committee amendments, but we want to record the divergence in relation to setting a percentage”, said deputy Carlos Zarattini (PT-SP), who is the government leader in the CMO (mixed Budget committee).