Brazilian fiscal policy off track: Lula da Silva wants license to spend US$36 billion off the cap

Senator and rapporteur of the Budget 2023, Marcelo Castro, presented on Monday (Nov. 28) the PEC (proposed amendment to the Constitution) that allows the future government of Luiz Inácio Lula da Silva (PT, progressive-globalist) a license to spend R$198 billion (about US$36 billion) outside the spending cap.

The spending cap is the rule that limits expenditure growth to inflation.

Read the full proposal.

If the text is approved, the president-elect’s team will be able to maintain the R$600 Brazil Aid payment in 2023.

The transition team’s calculations consider spending R$175 billion to fund the social program.

Read below the main points of the text of the PEC “Pura-teto” filed this Monday in the Senate:

• Brazil Aid (R$157 billion): full amount to fund the monthly R$600 for 21.5 million families;
• Children up to 6 years of age (R$18 billion): sum to pay R$150 to beneficiaries of the Brazil Aid with children up to 6 years of age;
• Investments (R$23 billion): the nature of the projects is not yet clear, and it will be up to the Lula government to decide.

R$105 billion would be free to spend.

This money was within the Budget and under the ceiling for funding the Brazil Aid of R$405 a month in 2023.

Now, everything spent on the benefit will be outside the ceiling.

With this maneuver, Lula da Silva will have at his disposal R$105 billion to spend on whatever he wants in 2023.

He can use these resources to increase the minimum wage, for example, or to readjust the salaries of public employees.

INVESTMENTS OF R$23 BILLION

The text leaves out of the ceiling about R$23 billion for investments.

Also excluded are “expenses with socio-environmental projects or projects related to climate change” that are “funded by donations”, such as transfers from the Amazon Fund.

With information from Poder360

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