PEC of the Transition should be extra ‘lean’ and foresee an overflow of a most of R$ 96 billion, say analysts

Text presented by the elected government foresees an overflow of R$ 198 billion. At the same time, Senator Tasso Jereissati proposed raising the ceiling by BRL 80 billion to guarantee BRL 600 of Aid Brazil.

Financial market analysts assessed that the Proposal for an Amendment to the Constitution known as the Transition PEC needs to be more “lean” and provide for the spending ceiling to be exceeded by a maximum of R$ 96 billion.

The content of the report was published by the newspaper “O Globo”. GloboNews also had access to the document.

The elected government presented a proposal for an amendment to the Constitution (PEC) that allows the spending of R$ 198 billion outside the ceiling next year to, among other points, guarantee the R$ 600 of the Auxílio Brasil (which will once again be called Bolsa Family). The amount, however, is considered “explosive” by financial market analysts.

At the same time, Senator Tasso Jereissati (PSDB-CE) presented a proposal that foresees raising the spending ceiling by R$ 80 billion in 2023 and, thus, allowing the maintenance of the payment of R$ 600 of the Brazil Aid next year and opening and space to recompose the Budget.

Members of the government transition team, such as former minister Nelson Barbosa, have already defended BRL 136 billion as an acceptable value because, in their understanding, it will not interfere in the spending/GDP ratio.

The report

The report by economist Pedro Schneider (Itaú) sent to the market says that R$96 billion is enough to pay for Lula’s promises and help those most in need without raising the public debt in an uncontrolled way.

“The BRL 198 billion (1.9% of GDP) proposed in PEC 32/22, currently pending in the Senate, point to a significant fiscal expansion next year”, states the report.

The document also says that the amount of BRL 96 billion “is more than enough to finance the main campaign promises and avoid cuts in some budget programs”.

And list the division:

• maintenance of the Brazil Aid at R$600 (cost of R$52 billion or 0.5% of GDP);
• additional BRL 150 for families with children up to 6 years old (BRL 16 billion or 0.2% of GDP);
• minimum wage increase of 1.4% real in relation to the value of the budget proposal (BRL 1,302 at a cost of BRL 9 billion or 0.1% of GDP);
• Popular Pharmacy program and other health expenditures (BRL 8 billion or 0.1% of GDP)”.

“We note that an increase in expenses without compensation can generate a substantial increase in the public debt and harm to society as a whole. We are currently projecting a primary deficit of 1.5% of GDP in 2023 and a 4 pp increase in gross debt to 78% of GDP, with an already high bonus of R$ 100 billion (1.0% of GDP)”, he says the document.

“Running the risk of an unbalanced trajectory of the public debt could lead to a new cycle of low growth, inflation and high interest rates, harming mainly those that the State should most protect”, he concludes.

Source: G1