Lula sets up strategy to shield minimum wage and Bolsa Família in the fiscal framework – 05/15/2023 – Market

President Luiz Inácio Lula da Silva (PT) outlined this Monday (15) the strategy for negotiating the fiscal framework in the National Congress. In a meeting with the core of government, Lula defined as a priority the preservation of a policy of valuing the minimum wage and Bolsa Família.

Lula’s guidance is that they remain immune to sanctions in case of non-compliance with the rules established within this new fiscal framework. The tendency is to impose, in the text, restrictions on expenses with civil servants and the granting of tax benefits, if these goals are not achieved.

Also during the coordination meeting, a joint action was designed by the Ministers of Finance, Fernando Haddad, and of Institutional Relations, Alexandre Padilha, in articulation in the Legislative.

In addition to a meeting with the mayor, Arthur Lira (PP-AL), Haddad will have two meetings with party leaders in order to convince them to preserve what he considers fundamental in the text.

In search of adhesions, Padilha will have meetings with parties, focusing on MDB, PSD, Republicans and Podemos. It will be up to the leader of the government in the Chamber, José Guimarães (PT-CE), to contain the PT and negotiate with the other center-left parties in an attempt to stop the presentation of alternative proposals to the text that require efforts from the government in articulation.

Congress and the PT administration are discussing including in the fiscal framework an excerpt that suspends the real rise in the minimum wage if the primary result target is not met for two years in a row, according to four people involved in the negotiation heard by the Sheet.

In this situation, the minimum wage would still be corrected by the official inflation index, to preserve its purchasing power, but without the additional increase foreseen in the valuation policy presented by the PT government.

For economists, the policy of valuing the minimum wage advocated by Lula may put pressure on the sustainability of the fiscal framework designed by Haddad.

As shown to Sheetit is possible that the minimum wage advances at a faster pace than the general rule of expenditure, which has been pointed out by economists as an inconsistency between policies.

The measure should cost BRL 82.4 billion between 2024 and 2026, according to government estimates. Next year alone, the calculation indicates an extra expense of R$ 18.1 billion, not yet contemplated in the LDO (Budget Guidelines Law) proposal.

In the following years, the impact will be even greater: R$ 25.2 billion in 2025 and R$ 39.1 billion in 2026. Lula’s proposal rescues the formula already used in PT administrations: adjustment for inflation plus GDP variation ( Gross Domestic Product) of two years earlier.

The rapporteur for the fiscal milestone, Cláudio Cajado (PP-BA), should present his text this Tuesday (16). It was in view of the possibility of defining strict sanctions in his report that Lula outlined this strategy.