A senator from the Amazonas believes the wealth disparity between rich and poor states in Brazil is alarmingly high.
Amazonas Senator Eduardo Braga led the Senate’s tax reform discussion on Tuesday.
He proposed increasing the Regional Development Fund from R$ 40 billion ($7.78 billion) to R$ 80 billion ($15.55 billion).
After talking to governors, Braga found consensus for this hike. Governors specifically suggest doubling the current budget.
Moreover, Braga said the fund aims for long-term regional development and inequality reduction.
For 20 years, Brazil used fiscal incentives for growth. Now, Braga says, the fund will replace these incentives. He calls this a shift to budgetary incentives.
Additionally, Braga wants to replace the Federative Council with a Management Committee. He will present his report on October 24.
The Senate will vote on it between November 7 and 9. The existing plan aims to reduce regional gaps and stimulate business.
Currently, it’s set at R$ 40 billion ($7.78 billion) annually. Braga believes the distribution criteria should be in the tax reform text itself.
The fund will start in 2029. It will begin with R$ 8 billion ($1.55 billion) and gradually increase until 2032.
From 2033, the Union will contribute R$ 40 billion ($7.78 billion) each year.
So far, the government kept the initial proposal at R$ 40 billion ($7.78 billion). But now, governors want to double this. They will push for this change in the Senate.
Background
The push to increase the fund isn’t new but has gained momentum. Brazil’s diverse geography makes regional development uneven.
This fund could help balance that. Historically, the north and northeast regions lagged behind in development.
Previously, fiscal incentives were the go-to solution. However, they weren’t as effective for long-term stability.
This new approach shifts the focus to direct investment, which can be more sustainable.
Eduardo Braga’s proposal comes at a critical time. Brazil’s economy has been struggling. Direct investments into regions could spur growth and employment.
Finally, the Senate’s upcoming vote will be significant. It serves as a barometer for Brazil’s evolving financial policies.
The fund may serve as a model for other nations facing regional disparities if approved.
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