Haddad says trying to avoid ‘major change’ in the framework – 06/15/2023 – Market

Minister Fernando Haddad (Finance) said this Thursday (15) that the government of Luiz Inácio Lula da Silva (PT) is seeking a “prior integration” with the National Congress to avoid major changes in the final text of the fiscal framework.

“Any change goes back to the Chamber of Deputies, which means saying that it is good that there is a prior relationship so that we do not have surprises, since we are doing everything in common agreement, with a quorum beyond expressive”, said Haddad.

“We are trying to make this understanding so that there are no major changes,” he added.

This Thursday, Haddad and Minister Simone Tebet (Planning and Budget) met with the leaders of the Federal Senate to discuss potential changes in the text of the new fiscal framework. Minister Alexandre Padilha (Institutional Relations) was also present.

At the meeting, Haddad was accompanied by the Executive Secretary of Finance, Gabriel Galípolo, and the Secretary of the National Treasury, Rogério Ceron. For Planning, the executive secretary Gustavo Guimarães also participated.

According to the head of the Treasury, at the meeting with the parliamentarians there was no agreement on possible changes, but an “understanding and clarification” of the consequences of each step.

“If by chance it returns to the Chamber, we hope that this will be seen as a gesture of improvement. This is how we are building it, with great care so as not to create embarrassing questions for either House”, he said.

Rapporteur of the fiscal framework in the Senate, Senator Omar Aziz (PSD-AM) confirmed that in the text he will present to the CAE (Economic Affairs Commission) he will remove the Fundeb (Fund for the Maintenance and Development of Basic Education) and the FCDF (Constitutional Fund of the Federal District) of the new ceiling. The solution for the reference IPCA (inflation index) to readjust the ceiling, however, is still under discussion.

These expenditures were included under the new framework by the Chamber of Deputies, and their removal resumes the government’s original proposal. In case of alteration in the Senate, the text must be sent back to the House, which will have the final word on the project.

The senator stated that there is a divergence between the technical studies carried out by the Senate and the Chamber regarding the impact that Fundeb and the Constitutional Fund would have if they stayed within the new fiscal rule.

“On the issue of the Constitutional Fund, the analysis that the Chamber makes is of a loss in ten years of about R$ 1.7 billion […] and in the Senate we have a slightly larger number than that”, he explained about the need to remove the instrument from the ceiling.

Regarding correction for inflation, Aziz said that there are different possibilities under discussion at the table. The Chamber’s text changed the time frame to 12 months until June of the previous year, since the PLOA (Annual Budget Law proposal) is sent until August 31 of each year, and the parameters are closed in July — when there is only data inflation data available until June.

“The only thing that the Ministry of Planning and Budget clarified for the political class is that the IPCA should temporarily stay the way it came from the Chamber, we would already need to change, order the LOA, in the Budget that will come until August 31, a compression of space tax with expenses ranging from R$ 32 billion to R$ 40 billion, depending on the calculations that are made”, said Tebet.

On Tuesday (13), the Secretary for the Federal Budget of the Ministry of Planning, Paulo Bijos, said that the change made by the Chamber would lead to a cut of up to R$ 40 billion in current expenses and public investments in the proposed Budget for 2024, as the government relied on the use of inflation from January to December —which tends to be higher than the one observed in the 12 months through June.

“We made it clear that there is an alternative, even given by the Senate, which would be the IPCA from December to November and therefore there is no estimate”, said Tebet. “For us it would be the best of all worlds, but it is a political decision.”

According to the minister, the important thing is that the framework “come out as quickly as possible”. Despite the more than 50 amendments presented by parliamentarians, Aziz hopes that the report will be read at the CAE next Tuesday (20th) and says that he will appeal to senators for the proposal to be voted on that same day, without requesting a view. .

The president of the Senate, Rodrigo Pacheco (PSD-MG), confirmed this Thursday that he will put the framework on the agenda in plenary on Tuesday, if it is approved by the CAE.

As any changes will make the fiscal framework return to the Chamber of Deputies for further consideration, Aziz said that he has already spoken with the mayor, Arthur Lira (PP-AL), about the changes. According to the rapporteur, he was sensitive to the numbers presented by the Senate studies and may put the topic back on the agenda for deputies.

“He said: ‘Look, Omar, if I have the numbers you’re telling me, there’s no problem at all'”, reported Aziz, on the studies of the Constitutional Fund.

The senate also said that it is trying to build a text “in common agreement” with the two Houses. “We are discussing politically, I just don’t want it to be understood that the rope is being stretched between the Chamber and the Senate”, he added.

Understand the status of the fiscal framework

What happened until now?

• The fiscal framework, new legislation that establishes the pace of growth of federal expenditures year by year, was presented on April 18 by the Lula government to Congress.
• The proposal was approved on May 23 in the House and went to the Senate.

What changes are being discussed now?

• The proposal’s rapporteur in the Senate, Omar Aziz (PSD-AM), said that he will propose the withdrawal of Fundeb (Fund for the Maintenance and Development of Basic Education) and FCDF (Constitutional Fund of the Federal District) from the new spending limit. These expenditures were included under the cap by the House. In case of alteration in the Senate, the text must be sent back to the House, which will have the final word on the project.
• Also under discussion is changing the IPCA (inflation index) reference interval to readjust expenses, which could expand spending limits.