Analysis: Why Administrative Reform Is Currently Brazil’s Top Economic Issue

RIO DE JANEIRO, BRAZIL – Special Secretary of Debureaucratization Paulo Uebel’s resignation, together with that of Salim Mattar, Secretary of Privatizations, on Tuesday, August 11th, reinforced the call of experts for the administrative reform bill to be analyzed by Congress, together with the tax reform.

The point is that the departure of Uebel, who joined the economic team to help cut spending on government employees, casts doubt on the government’s commitment to the Brazilian fiscal scenario.

The agendas led by Uebel and Mattar are perceived as paramount to reducing the size of government and freeing up space in the federal budget, which has 94 percent of its resources tied up in obligatory expenses.

Last year, the country spent 3.5 times more on civil servants payroll than on health, and twice as much as on education, according to a study released by the Millenium Institute this week.

To illustrate this, federal, state, and municipal employees combined received the equivalent of 13.7 percent of GDP. This ratio is 3.9 percent for health and 6 percent for education.

The statutory spending ceiling prevents these figures from rising above inflation from one year to the next, but the limitation is threatened in the midst of social emergencies that became more evident during the pandemic. In addition, there is a wing within the government that advocates increasing public spending on infrastructure, which would also strain the budget.

With the public debt likely to reach 100 percent of GDP by the end of this year, as a result of the emergency fiscal spending of the health crisis, it is becoming clearer that tax reform and privatizationd would not be enough to solve the fiscal problem, according to economists. The budget needs to be given room.

“It is unfeasible for tax reform to be studied separately from administrative reform,” says attorney Ives Gandra Martins, president of Fecomércio’s Council, in a meeting with business representatives on Wednesday, August 12th.

“The bureaucratic burden currently in the country ultimately dictates the tax burden,” he said during the meeting.

Gandra intends to submit the council’s views on the issue in a meeting with government officials, scheduled for August 24th.

In the wake of attempts by civil society to expedite the debate, the Millennium Institute recently launched the campaign “Destrava! Por uma reforma administrativa do bem” (For a Positive Administrative Reform). With this initiative, the right-wing organization hopes to persuade legislators of the importance of the issue returning to the National Congress’ agenda.

The Minister of Economy, Paulo Guedes, has been promising to review the government employee rules since last year. At the start of the year, he even said he had the text ready, but the issue did not withstand the pressure from members of the civil service, which has great influence in Brasília. Now, it has been postponed to 2021.

Source: Exame