(Bloomberg) — Brazil’s congress approved a proposal that gives President-elect Luiz Inacio Lula da Silva an additional 168 billion reais ($32 billion) to spend next year, allowing him to pay for social welfare programs and other campaign promises.
(Bloomberg) — Brazil’s congress approved a proposal that gives President-elect Luiz Inacio Lula da Silva an additional 168 billion reais ($32 billion) to spend next year, allowing him to pay for social welfare programs and other campaign promises.
Lower house representatives approved the bill by 331-163 votes in a second round of voting Wednesday. As a constitutional amendment, it required the backing of at least 308 lawmakers in two rounds. It received the backing of senators immediately after.
The proposal boosts the country’s spending cap, which limits the growth of public outlays to the inflation rate, by 145 billion reais that will mostly be used to finance cash handouts to the poor and other social programs. It also allows the incoming government to direct 23 billion reais into investments that won’t be subject to the fiscal rule in case tax collection surpasses expectations.
The approval is a political victory for Lula, who starts his third term with ample budget space, but also a matter of concern for investors who fear about the sustainability of Brazil’s finances.
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Speaking after the bill’s approval in the lower house, incoming Finance Minister Fernando Haddad repeated pledges to soon unveil a “credible” fiscal strategy to assuage such concerns.
Congress Negotiation
The bill was only approved after the lower house cut short the length of the spending waiver to one year from two years. For that reason, the text returned to the senate for two additional rounds of voting.
Lula’s team also had to give in to demands from lower house Speaker Arthur Lira to ensure enough votes in favor of the bill. Lira was irked by a Supreme Court decision that considered unconstitutional the mechanism adopted by congress to allocate public funds. Dubbed as “secret budget” for its lack of transparency, the system allowed the budget rapporteur — and by extension the heads of both houses of congress — to distribute billions of dollars of public money to projects sponsored by lawmakers in their home states, often in exchange for votes.
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Lawmakers agreed on a different system that shares the control of such funds with the executive branch.
The approval of the spending bill clears the way for a vote on next year’s budget and for Lula to appoint more cabinet members, starting on Thursday. He takes office on Jan. 1, 2023.
–With assistance from Martha Beck.
(Updates story with bill’s approval by the senate)
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