Paulo Guedes Brazil Package Will Face Resistance In Congress

Paulo Guedes brazil


Paulo Guedes brazil:


Set of measures proposes decentralization of resources to states and municipalities and server salary cut.

Less than two months from the end of the year, Economy Minister Paulo Guedes presented an ambitious reform package to address the structural problems of public accounts and pave the way for stronger economic growth.

The set of proposals foresees several fronts, but it will have to face Congressional artillery, often sensitive to corporate lobbying.

Approval of new government proposals for the economy will come at different times, Guedes predicts

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The plan changes the logic of public spending, with the decentralization of resources to states and municipalities, expenditure relief and adjustment measures focused on the public servant.

Named Plano Mais Brasil, the government's package of measures was handed to the Senate by President Jair Bolsonaro himself, alongside Guedes.

There are three proposals for Amendment to the Constitution (PECs) that seek to promote a complete "transformation" of the way the state operates its spending.

To approve the measures, 308 votes in the House and 49 votes in the Senate are required in two rounds.

One of the proposals is the so-called federative pact, which revises fiscal rules and injects $ 400 billion of oil exploration to states and municipalities over the next 15 years.

The package also includes an emergency PEC to open $ 28 billion in the budget over two years and another to remove the $ 220 billion stamp on resources now standing in government funds.

It is the first chapter of a broad reform agenda, which also foresees a change in functionalism, tax reform and acceleration of privatization. These will still be sent to Congress.

In exchange for increased resources for governors and mayors, the government wants the green light from Congress for measures such as reducing staff hours and wages by up to 25%, freezing the minimum wage for two years, suspending career advancements and banning new public tenders.

Among the most controversial measures is the reduction of tax benefits (subsidies and exemptions), from the current 4.4% of Gross Domestic Product (GDP) - about R $ 300 billion - to a maximum of 2% from 2026, and the extinction of municipalities with less than 5,000 inhabitants.

The strategy was built to allow the accounts to go back on track by 2026 - when the spending cap (an instrument that limits spending growth to inflation) turns 10 years old and can be revised.

Despite being a broad set of measures, the Minister of Economy admitted that President Bolsonaro imposed limits on the scope of the proposals.

One of the measures intended by the minister, the withdrawal of the guarantee of the minimum wage adjustment for inflation, was discarded at the request of the president.

"Bolsonaro is a man of enormous political intuition. (The president said) 'Hey, minister, you just made a huge pension reform, the class is still a little dizzy, do you still want to untie the old men's money? What's the story?' Okay, that's true, I get it. It's early. "

In his assessment, the liberal agenda needs to be implemented little by little, as the country is not prepared to end some benefit correction rules. "Liberals are never revolutionaries. They are evolutionists," he said.

The emergency PEC includes permanent and temporary adjustment measures in the federal, state and municipal accounts.

In the case of temporary workers, they will be valid for two years and include a reduction of the civil servants' hours and salaries by up to 25%.

Affected employees may have a second job with a formal contract to compensate for the loss of salary, provided there is no conflict of interest.

The PEC foresees the triggering of these triggers when the so-called golden rule of the Budget (which prevents the issuance of debt securities to pay current expenses) is broken in one year, in the case of the Union. For States and municipalities, they will always be valid when expenditure exceeds 95% of revenue.

The PEC of the federative pact, in turn, will allow managers to unify the health and education minimums that today need to be met separately.

The goal is to give more flexibility because today some municipalities and states with older population face difficulties to meet the education floor.

The idea is that it is possible to compensate for this deficiency with health expenses, and vice versa. The government even considered allowing retirees and pensioners to be included in the minimum but gave up on the idea.

Guedes and his assistants avoided setting a deadline for approving the broad reform agenda. But he said he did not fear the risk that the proposals would be disfigured.

The proposals also provide for the so-called state of fiscal emergency. If the governor does not wish to issue a state of emergency, automatic locks will be triggered to prevent the governor from leaving the broken entity to the next government.

"The governor who has no political courage to tackle the fiscal problem will not be able to push that ball forward," he said.

Guedes reiterated that governors and mayors, elected by vote, have a responsibility to take care of their budgets, but to do so, resources must be redistributed.

He added that the proposal for de-taxation and unbinding of the budget was not total. "Brazil would not be ready to de-index, unlink and release all at once," he said.


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