Congress to Decide on Brazil’s 2014 Budget

By Maria Lopez Conde, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The final version of the proposed federal budget (LOA) report for 2013 has cut the amount of funding provided for the Growth Acceleration Program (PAC), the government’s centerpiece investment initiative, by R$3 billion. The new budget also includes a minimum wage of R$724 and a dim outlook for GDP growth in Brazil next year.

The PAC funding decrease was caused by a diversion of funds towards parliamentary amendments, public works sponsored by deputies and senators. This is essentially money destined for “pork barrel,” or provisions added to legislation to finance local projects in a lawmaker’s district. The federal government had initially granted the development program R$63.2 billion, but with those “pork barrel” cuts, PAC funding fell to R$61.7 billion.

The PAC – initially launched in 2007 under Lula’s presidency – aims to provide funding for much-needed infrastructure projects. Announced in March 2011, PAC 2 sought to make R$959 billion in investments from 2011 to 2014.

The areas that will see spending decreases will be transportation, with a R$1.5 billion budget cut and National Integration, with R$682 million. Each member of Congress will also have R$14.68 million to use towards individual amendments. At least R$7.34 million of that total must be geared towards healthcare. Two weeks ago, the Brazilian Senate approved a constitutional amendment that doubled the amount of pork allowed in the budget.

Those individual amendments are part of an agreement that made bringing the budget law to a vote possible. In Brazil, these are known as “impositive” amendments and they force the federal government to at least partially pay for projects deputies deem worthy of including in the country’s budget.

The minimum wage had originally been set at R$722.90 but was raised by the writer of the budget, deputy Miguel Corrêa from the Workers’ Party, due to a change in the GDP growth for 2012. The Brazilian government uses GDP growth estimates to calculate the minimum wage. The seemingly small change in the minimum wage will cost public coffers R$250 million.

Infrastructure investments also suffered cuts due to a rearrangement in the budget, which diverted R$22.5 million away from spending in that area, as well as in legal assistance to citizens, child care and support for victims of violence to fund medical and dental care for the employees of Brazil’s Supreme Court of Justice.

Experts believe infrastructure investments are key in Brazil, where the poor state of roads and lack of railroads drive production costs up. These cuts were introduced through amendments by Senator Ricardo Ferraço from the PMDB.

“Spending on employees and social security contributions remained practically around the same benchmark, which is about R$242 billion,” Corrêa defended, while also lauding rising investment spending. “Investment expenditures saw an increase in R$14.5 billion,” he said.

The new budget also included a revision of the so-called “macroeconomic parameters,” the numbers used to calculate salaries, among others. The growth forecast for 2014 was revised to 3.8 percent, down from four percent.

These proposed budget cuts for social and investment programs come just days after Brazil’s federal government announced it had collected R$112.5 billion in the month of November 2013, a 27 percent increase from the R$88.5 billion it collect in November 2012. The record-breaking performance was partly driven by paybacks from mining giant Vale and financial institutions.

In fact, the total amount of Brazil’s budget increased from 2013 to 2014. However, Corrêa pointed out that this was the “smallest revision in revenues” in the last few years. In 2013, revenue grew by R$22 billion and in 2012, by $26.1 billion. This year, Brazil’s revenues will only see a R$12.1 billion expansion. Brazil’s budget foresees expenditures of R$2.48 trillion.

Voting was set to take place yesterday, Tuesday, December 17th but was postponed so that the Mixed Budget Commission (CMO) can deliberate on other pending legislation first. This has raised fears that the government will once again delay its vote on the 2014 budget, a decision, which in 2013, led to slow release of funds for vital infrastructure projects. Voting could take place as early as today, Wednesday, December 18th.