Government wing defends calamity decree 4 months before election
- June 3, 2022
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Measure would make fiscal rules more flexible and free up spending to subsidize fuels, but faces resistance from the economy
Pressure for a solution to the rise in fuel prices led a wing of the Jair Bolsonaro (PL) government to defend a new public calamity decree just four months before the election.
Under the calamity, the understanding is that the government would have more security to open extraordinary credits — which allow the use of resources outside the spending ceiling (a rule that prevents the growth of expenses above inflation). The objective is to fund measures to subsidize prices or pay aid to truck drivers, delivery people and app drivers.
Among the justifications used by those who defend the use of the instrument are the Ukrainian War and an alleged risk of diesel shortages.
Defenders of the calamity claim that the mechanism, provided for in the Constitution and also in the LRF (Fiscal Responsibility Law), removes the formal requirements of urgency and unpredictability for opening extraordinary credit.
The calamity could also eventually be used to circumvent electoral restrictions, which are now a major concern of the government when adopting measures.
The electoral law prohibits, in the year of the dispute, the “free distribution of goods, values or benefits by the public administration”, except in extreme situations (such as calamity or emergency) or in cases of social programs authorized by law and which were already performed in the previous year.
The last time a national public calamity decree was passed by Congress was in March 2020, during the Covid-19 crisis. The exceptional situation lasted until the end of that year and was not restored even the following year, when the pandemic worsened and reached its peak in the country.
The movement for a new calamity comes after a new edition of Datafolha shows an increase in the advantage of former president Luiz Inácio Lula da Silva (PT) over Bolsonaro in the poll of voting intentions. The PT appears with 48% in the first round, compared to 27% for the president.
Since last week, the possibility of a new decree has been discussed in meetings with the presence of authorities, according to government interlocutors heard by the Sheet. Among the participants are ministers Ciro Nogueira (Casa Civil) and Paulo Guedes (Economy).
A measure that promotes a reduction in fuel prices in the short term is defended by ministers such as Nogueira and Fábio Faria (Comunicações).
But the vision is not consensus in the government. The option for calamity faces resistance from several technicians (especially from the Ministry of Economy), who do not see the conflict in Europe as a plausible justification for such a drastic measure.
In Congress, government allies are emphatic in saying that the government needs to take some action to not let the bill for the increase in fuel and energy tariffs fall into the pockets of the poorest.
Parliamentarians in favor of the decree argue that a risk of diesel shortages in the country due to high prices would justify the calamity.
The view is that only relying on Petrobras to eventually hold down prices could exacerbate the risk of diesel shortages (since lower oil prices discourage competitors from importing). Therefore, according to this interpretation, the declaration of calamity with the consequent adoption of some type of subsidy would be more indicated.
Another group advocates further changes to the spending cap. All discussions, however, are preliminary, according to a congressional leader.
Politicians close to the president say Guedes is under pressure. According to these interlocutors, if there is no solution for fuel, there may be a new offensive to remove him from office because the lethargy in the economy could compromise Bolsonaro’s reelection project.
On Monday (30), the president of the Chamber, Arthur Lira (PP-AL), raised the tone and said he would “squeeze the government” for a solution.
“We are going to tighten the government this week so that it decides whether or not to make a fuel subsidy,” he said in an interview with Jornal da Record. “The governments of the most advanced countries are giving subsidies for the increase in fuel prices, which is a worldwide problem and interferes in the life of any Brazilian”, he said.
The mayor himself admitted the rumors about the triggering of the calamity. “Brazil has too many resources, Petrobras has it and Brazil has it. The problem is how much this fits in the spending ceiling or not. Hence these rumors of the calamity button that Guedes has to push,” he said.
Economics officials acknowledge that the statement expresses political concern about the increases and puts pressure on the government.
According to reports heard by Sheetthe political wing says they received favorable signals in conversations with Guedes and understands that the technical staff of the portfolio is the only obstacle.
Within the economy, however, the view is that Guedes seeks to dehydrate the idea by showing that pressing the calamity button results in a lock on other expenses, such as civil servants’ salaries — readjustments are vetoed in this situation.
In recent days, the government has started to discuss the possibility of giving up a 5% linear increase for servers due to lack of space inside the roof.
Technicians also fear that a decree of calamity will open the door to spending in an election year.
There is concern in the president’s campaign that rising fuel prices are the main obstacle to reelection. In an interview with SheetCommunications Minister Fábio Faria said that is precisely what is holding back Bolsonaro’s growth in polls.
He also defended using R$ 15 billion of Petrobras’ profits to create some kind of subsidy. “What is still holding back is the price of fuel. But even so, he [Bolsonaro] is growing,” he said.
Parliamentarians raise the possibility of Petrobras itself creating a kind of subsidy as a company policy, with the allocation of surplus dividends that exceed the minimum to be distributed to shareholders (which would not affect the Union Budget). But this route is considered time consuming, as the change in command of the company has not even taken place.
The president of the Central Bank, Roberto Campos Neto, said this Wednesday (1st) that the implementation of subsidies to mitigate the social impacts of the rise in commodity prices (such as oil) is a “good solution”, but considered that measures in this sense carry the risk of becoming permanent public expenditure.
The economic team itself has internal studies for the implementation of a truck driver’s voucher, a measure that has an estimated cost of R$ 1.5 billion. But there are still no details on where the resources would come from.
The political wing of the government has always pressed for granting subsidies, but has encountered resistance from Guedes to an immediate initiative. One of the arguments now, however, is that the rise in prices persists even after the 60-day deadline cited by the Minister of Economy in March to hold back further measures.
“We will move according to the situation,” Guedes said on March 10. “If that [guerra] resolves itself in 30 or 60 days, the crisis would be more or less addressed. Now, is this going to rush and turn into an escalation? Then you start thinking about subsidy for diesel”, he added at the time.
Questions and answers
What is the impasse over fuels?
Government members defend a subsidy from the public coffers to help the population pay the price of fuel, but there is no space in the spending ceiling – a rule that prevents federal spending from growing beyond inflation.
What is the Calamity Decree?
According to the Constitution, the President of the Republic can propose the declaration of a state of calamity, which will depend on the approval of the National Congress. In a national calamity, the Union is authorized to adopt an extraordinary tax regime, with more flexibility to spend — at the same time that some restrictions automatically come into effect, such as a ban on readjustments in the salaries of federal servants (counterparts added to the Constitution in 2021). ).
What do government officials want?
There are discussions within the government to declare calamity and pave the way for the use of extraordinary credits, outside the spending ceiling, to fund measures against the rise in fuel prices. In addition to the Ukrainian War, which boosted oil prices, there are those who justify the measure with the risk of a shortage of diesel oil. The strategy has defenders within the government and also in the National Congress.
Is the calamity proposal a consensus?
Not. Economics technicians resist the calamity strategy. In addition to not seeing any justification for this, there is a fear that the measure will open the door to spending in an election year.