Brazil’s Move to Free State Firms Raises Concerns Over Unchecked Spending
The Brazilian government has proposed a controversial plan to remove state-owned companies from the federal budget.
President Luiz Inácio Lula da Silva sent two bills to Congress that would loosen rules for public companies, allowing them to operate independently even if they still rely on National Treasury funds.
Critics argue this move could make it harder to control spending by these enterprises and potentially create room for new expenditures. Some experts view this as a possible way to circumvent the government’s fiscal framework.
Currently, 17 state-owned companies are considered dependent on the National Treasury, including Telebras, Infra S/A, Conab, Embrapa, and Codevasf.
These companies have a budget of approximately R$39 billion ($6.96 billion) this year, with only R$1.7 billion ($303.57 million) coming from their own revenue.
Under the new proposal, these companies could become independent by signing a management contract outlining performance goals and objectives.
During the transition period, employee salaries would still be subject to the constitutional ceiling for public servants. Experts in public finance have expressed concerns about the proposal.
Lucieni Pereira, president of the Association of External Control Audits of the Federal Court of Accounts, warns that this could be used to circumvent spending limits and public controls.
Brazil’s Move to Free State Firms Raises Concerns Over Unchecked Spending
Economist Selene Peres Peres Nunes criticizes the approach as creative accounting rather than addressing real management issues. The Senate’s Budget Consultancy has raised concerns about the proposal.
They note that it could allow dependent state-owned companies to execute their expenses as if they were independent, potentially exempting them from restrictions like spending freezes.
The government defends the proposal as a way to help state-owned companies become less dependent on Union resources. The Ministry of Management and Innovation in Public Services argues that current rules prevent these companies from achieving financial independence.
In contrast, the Ministry of Planning and Budget claims that the proposal would improve public accounts. Despite these assurances, the proposal has sparked debate in Congress.
The coming weeks will likely see further discussions and potential modifications to the proposed bills as they move through the legislative process.
Brazil’s Move to Free State Firms Raises Concerns Over Unchecked Spending
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This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief