Farm will discuss with AGU ‘despedalada’ of writs – 08/10/2023 – Market

Minister Fernando Haddad (Finance) should discuss next week with Minister Jorge Messias, from the AGU (Attorney General of the Union), the government’s strategy to “unpedal” the judicial debts dammed up by a constitutional amendment approved in the Jair Bolsonaro government ( PL).

As revealed to Sheet, the government is considering including in a PEC (proposed amendment to the Constitution) the possibility of classifying part of the so-called precatorios as a financial expense. The measure would allow the Executive to expand payments without breaking the limits of the new fiscal framework, nor needing to change the fiscal targets already signaled by the economic team.

The proposal is seen by critics as a maneuver to unlock these expenses without showing the worsening of fiscal statistics, in a kind of reissue of the creative accounting adopted in previous PT administrations. Government officials, however, reject the label of maneuver and say that the initiative is a “disruption” in the face of the damage left by Bolsonaro.

Haddad outlined the fiscal policy objectives of zeroing out the primary deficit in 2024 and achieving a surplus of 1% of GDP (Gross Domestic Product) by 2026. propose the reclassification of precatories.

The government has constantly reinforced its intention to bring the deficit to zero for next year, especially at a time when different risk rating agencies are improving Brazil’s assessment based on its fiscal commitment. At the same time, the economic team sees a window to regularize the skeleton and avoid a snowball of these sentences in the future.

According to an interlocutor, recent estimates by the Treasury indicate that, after a “bubble of convictions” against the Union, the flow of new judicial debts should cool down in the coming years, converging to values ​​closer to the limit created for these expenses and which has been in force since 2022 .

Calculations indicate that the excess in relation to the precatório ceiling should be between R$ 5 billion and R$ 10 billion, less than the current values ​​of almost R$ 30 billion postponed each year. Last Friday (4), the Minister of Finance himself cited similar numbers.

The government sees in this scenario a “window of opportunity” to settle the payment of judicial debts before 2027, when the PEC of Precatorios expires.

The idea is to keep the payment of the flow within the limits and give a “specific treatment” to what is settled above the sub-ceiling (including in this portion the new excess sentences and the dammed stock).

In this way, part of the spending on precatório would remain within the framework and the target, while another part would become financial expense —without taking up space for other policies or worsening the primary result, although it will continue to affect public accounts by boosting the country’s indebtedness.

The government’s intention to propose a solution to the precatorios problem was well received among economists outside the government and members of the political class, who were heard with reservation. Solving an issue contracted for 2027 in advance is considered positive.

A report by the National Treasury predicted that the bill could reach R$ 200 billion. The Ministry of Planning and Budget issued a warning that the settlement of judicial debts in 2027 could leave all bodies without money for basic expenses for the cost of the machine and investments.

The controversy is in the format considered by the Ministry of Finance for the “dispedaling” of precatories.

Financial expenses today include the payment of interest to investors and the redemption of public debt bonds. They are different from primary expenses, which help to promote public services and include personnel expenses, social benefits, machine costs and a good part of investments.

As precatorios are liabilities that involve payroll, social security benefits or costing actions, they are also considered a primary expense. The only difference is that they were claimed through the judicial process.

Technicians with experience in fiscal management, currently outside the government, consider that reclassifying precatories through a PEC is inappropriate.

Other expenses carried over from one year to the next, such as investments in major works, do not cease to be a primary expense just because they formed a stock. Technically, they are the so-called remaining payables, which fall within the limits of the current spending ceiling, will be under the new framework and are accounted for in the primary result.

One of the consulted sources recalls that, in 2015, when the Ministry of Finance regularized the tax pedals sponsored by former Treasury Secretary Arno Augustin, these expenses also maintained their original classification. That year, the central government (which brings together the Treasury, the Central Bank and the INSS) recorded a shortfall of R$120.5 billion in historical values ​​(or R$180 billion in updated figures).

Another wing defends the idea under study by the government. Economist José Roberto Afonso, professor at the IDP (Brazilian Institute of Education, Development and Research) and one of the fathers of the LRF (Fiscal Responsibility Law), states that the classification of precatório should be segregated.

According to him, part of the expense is in fact primary (corresponds to a personnel payment or benefit, for example), but the portion of charges and monetary restatement should be considered a financial expense.

“Let’s say that, ten years ago, a bonus of R$ 10,000 was paid to a judge. In the Budget, it entered as a personnel expense. The judge goes to court, claiming unhealthy conditions, and says that the salary should be R$ 12,000. it takes years to process, until the STF recognizes that he is right and issues a precatório. But then, let’s say, the amount owed has already become R$ 19,000, R$ 2,000 of which is the salary difference and another R$ 7,000 of monetary restatement and interest Although the precatório is worth BRL 9,000, I defend that only BRL 2,000 is a primary expense”, exemplifies Afonso.

Afonso recognizes the existence of operational obstacles to separating the components of the precatório in the classification of expenses, but affirms that the advance in the digitization of judicial processes facilitates this task of identifying the original value and separating it from the charges.

An eventual solution for precatories is closely monitored by the market. The expectation so far was focused on regulating the so-called meeting of accounts — the use of values ​​as a bargaining chip to reduce debts with the Union or pay grants in federal auctions.

The use of precatories in concessions, however, is suspended by the AGU. To date, the issue remains unregulated.

According to interlocutors, Haddad and his team have shown resistance to betting on this instrument. Although the accounting can reduce the expenditure liability, the transactions force the government to give up revenues – an essential input to reach the desired fiscal targets.