Deputies tighten Lula’s mobile spending cap – 05/10/2023 – Vinicius Torres Freire

The moving ceiling on government spending should not be the one proposed to Congress by the Lula government. As has been written in these columns, there will be a somewhat greater limitation on certain expenditures and more of what is called “punishment” in case of non-compliance with primary balance targets (the difference between revenue and expenditure, excluding interest expenditure).

One restriction that may be included in the package is the government’s obligation to take measures if the accounts indicate that it will be difficult to meet the primary surplus target. To put it bluntly, this is some version of the old contingency. In the event of revenue frustration or excess expenditure, the government will be forced to suspend expenditures provided for in the current year’s Budget.

The method of contingency is still being discussed. The issue divides the government, as can be expected, and provokes anger in the PT. The internal division and renegotiations of the framework with the Chamber delayed the conclusion of the project, reported by Deputy Cláudio Cajado (PP-BA), who is the voice of Arthur Lira (PP-AL), President of the Chamber, on the subject.

Lira wants to approve the government project without fundamental change. But it also makes use of the framework debate to put a little more pressure on the government.

Among other likely changes in the framework are the triggers: overspending (did not have a surplus), unable to readjust salary, waive income, etc. Certain expenses will be under the sliding ceiling cap: nurses’ salaries, state fattening money. Expenditure growth percentages remain as they are.

ELETROBRAS

Luiz Inácio Lula da Silva and the PT leadership want to regain control over Eletrobras. The most PT core of the government also encourages the president’s desire to return to command the company. For what?

The president went to the Supreme Court to ask the government to have votes equivalent to the weight of the government’s stake in the company, a weight that was limited in privatization, under Jair Bolsonaro. The government wants to appoint the board.

It is a demand from the PT command, which wants to renationalize the company, and from the more PT core of the government, centered on the Civil House. They are the same people who animated the decrees to change sanitation laws.

What would the government gain by resuming Eletrobras?

There would be party-political disputes for boards; the risk of appointing a corrupt. There will be great image damage, fair or not (it should increase the perception of the risk of the government intervening, breaking contracts, etc.). There is a risk of worsening the company’s management, which is being reorganized, with a large debt reduction and increased investment.

The Lula government can regulate the company, the sector or make an intelligent and useful industrial policy (“green energy transition”) without undue tampering with the most elementary administration. It applies to Eletrobras, to Petrobras, to any public or fully state-owned company.

Speaking of regulation, the electricity sector has been in need of a profound and complicated reorganization for at least a decade. In addition to allowing increased efficiency, reorganization of the price system and facilitation of investments, it would be a way to review subsidies and so many favors in the sector. Why doesn’t the government spend its energy on something useful?

In a better economic environment and with the growth of Eletrobras itself, the government can sell its still huge stake in the company with relevant gains. It may be extra money to facilitate the settlement of public accounts. Lula 3 will badly need any money in order to make his fiscal framework work, which is crucial to the government’s economic success.

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