Framework: see in 4 points what the rapporteur says – 05/08/2023 – Market

“Arcabouço refers to bones, mortal remains. Let’s do something more modern, shall we?”, he said, in an interview with SheetDeputy Cláudio Cajado (PP-BA), rapporteur of the proposal that seeks to balance public accounts (to avoid an uncontrolled growth of debt as a proportion of GDP).

The new name, according to him already approved in an agreement in Congress, will be the Sustainable Fiscal Regime.

In addition to this novelty, see three other points advanced by the rapporteur for the new fiscal framework pending in Congress — he hopes to present his text this Wednesday (10).

Expenditure parameters will be shielded against changes in government

The new fiscal rule has indicators that dictate the pace of growth in expenses: it predicts that expenses will rise from 0.6% to 2.5% above inflation per year, but these references would only be valid between 2024 and 2027.

After that, the choice of parameters could be made in the LDO (Budget Guidelines Law), and that is where the rapporteur sees a problem. The LDO is easier to change: it needs the approval of only half of the present at the session plus one, provided that 257 deputies and 41 senators attend (simple majority).

According to Cajado, on average the LDO has been changed three times a year.

The rapporteur intends to set these parameters already in the text of the complementary bill, a text that is more difficult to change: it needs the endorsement of at least 257 deputies and 41 senators (absolute majority).

Fixing them in the new fiscal framework would make it difficult for them to be changed from 2028 onwards. “It brings security and more reliability,” said Cajado.

Requirements can get tougher if rule is broken

The rapporteur considers tightening the requirements for compliance with the rule. According to the government’s proposal, if the fiscal target is not met, the pace of real growth in expenses drops from 70% to 50% of the increase in revenues, and the president needs to send a message to Congress citing adjustment initiatives.

Among the changes studied by the rapporteur may be the obligation to set aside resources during the year if there is a threat that the fiscal target will not be achieved. In the government version, blocking would be optional.

“We are evaluating what we call triggers. They would be more punishments. Sanctions for non-compliance with the goal”, said Cajado.

List of expenses that are outside the ceiling can be revised

The rapporteur indicated that he is studying modifying the list of expenses that are outside the limit –according to him, there was a lot of criticism of exceptionalities–the government left 13 cases outside the shackles of the new rule.

“There are many suggestions, to include and to remove [da lista de exceções]. Much more to take away”, said Cajado, although he avoided explicitly declaring his position on the matter: “I don’t want to express an opinion, because the discussion could get stuck. (…) I’m collecting the information”.

He indicated, however, that he hopes to change expenses that are now constitutionalized by the Transition PEC and would no longer have constitutional protection with the sanction of the framework.

Treasury investments in state-owned companies could be one of the main targets of this change.

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SEE THE ROUTE OF THE NEW TAX RULE IN THE CONGRESS

As it is a supplementary bill sent by the Executive Branch, the text began to be discussed in the Chamber of Deputies. The House will have the final word on content, even if the Senate makes changes during consideration.

Where can the proposal for a fiscal rule go through the Chamber?

A complementary bill of law is normally forwarded for analysis by commissions specializing in topics covered by the proposal —called merit commissions. There are also the Finance and Taxation and Constitution and Justice commissions, which can analyze the merits and/or admissibility of complementary bills, that is, whether they are in accordance with budgetary rules and constitutional precepts. All must also pass through the plenary.

Can the project go to a special commission?

Projects dealing with matters relating to more than three merit committees are sent to a special committee, which replaces all others.

Can it be handled urgently?

The plenary may approve a request for the supplementary bill to be processed on an urgent basis. Generally, this depends on the leaders’ agreement. The President of the Republic may also request an urgent vote on a project of his own initiative. In this case, the proposal must be voted on within 45 days, or it will block the agenda of the Chamber of Deputies or the Senate (depending on where it is at the time).

How does the emergency system work?

A project under an urgent regime can be voted quickly in plenary, without the need to go through the committees. The rapporteurs of the proposal in the committees give their opinion during the plenary session. The text is read from the tribune, and there is the possibility of an immediate vote.

What does it take for the proposal to pass Congress?

Complementary bills require an absolute majority of favorable votes, that is, more than half of the members of each House. That means at least 257 votes in the House and 41 votes in the Senate.

What is the final course of the procedure?

A complementary bill sent by the Executive is considered first by the Chamber of Deputies. Then the text goes to the Senate. If there are no changes, the text goes to the presidential sanction.

However, if the senators make changes to the text, the project returns to the Chamber, which will have the final word — the deputies can accept the senators’ changes or restore the text originally approved by the Chamber. In this case, after the new vote, the text is sent to the President of the Republic for sanction.

The Chief Executive has 15 working days to sanction the project in its entirety or with partial vetoes in some devices, or even veto it entirely. All vetoes undergo further validation by Congress, which can overturn them with an absolute majority of deputies (257) and senators (41).