Throughout the month of October, Brazil’s lower chamber of congress did not vote on a single bill or presidential decree. The president of the chamber, Rodrigo Maia from the Democratas (DEM) party, has warned that this paralysis, the result of obstruction from both opposition and government-supporting parties, is causing delays to the approval of the 2021 national budget – a process already affected by the coronavirus (Covid-19) pandemic and the federal government’s unclear economic and fiscal priorities.
President Jair Bolsonaro’s government submitted a draft budget to congress on 31 August, just within the end-of-August deadline. However, the draft budget is yet to be discussed at committee-stage, as the setting up of the mixed budgetary committee (CMO) has been delayed amid disputes over the appointment of its head. An agreement reached in early 2020, according to which federal deputy Elmar Nascimento of the DEM would be elected to preside over the CMO, is being challenged by parties from the ‘centrão’ bloc – the group of ideologically flexible parties which currently props up the Bolsonaro administration in congress, and with which the DEM broke ties in the lower chamber in July [WR-20-30] – who want Flávia Arruda, a deputy from the Partido Liberal (PL), to head the CMO.
At stake for the centrão is the presidency of the lower chamber. Maia’s term comes to an end in February 2021 and he cannot seek re-election in the same legislature (although his counterpart in the senate, Davi Alcolumbre, also from the DEM, would be keen to find a way around this rule). The CMO is the most important and influential parliamentary committee, and the election of its president is considered an indication of who will go on to win the leadership of the lower chamber for the next two years.
Maia has criticised this political manoeuvring and the impact it has on the legislative agenda and, by extension, on the government. In comments on 27 October, he noted that most of the obstruction of the chamber’s voting agenda has come from the government base, that is to say, the centrão (as part of the rapprochement between the government and the centrão, a member of the bloc, Ricardo Barros, from the Partido Progressista [PP], was appointed leader for the government agenda in the chamber). Maia also called on political parties to respect the agreement regarding the CMO president (if lack of consensus continues to obstruct the setting up of the CMO, congressional rules allow for the budget to be directly submitted to a vote in the plenary).
“I’ve heard they’re trying to block my agenda in the chamber, but the truth is they are disrupting the government’s agenda,” Maia said of the centrão’s obstructionism during an online event organised by business daily Valor Econômico on 2 November. In Maia’s view, it will be difficult to approve the budget for next year without first passing a constitutional amendment, dubbed the ‘emergency PEC’, which would allow for various cost-cutting measures should the federal, state, or municipal governments be at risk of breaking fiscal rules.
The emergency PEC was tabled in November last year as part of Economy Minister Paulo Guedes’ ‘Mais Brasil, Menos Brasília’ reform plan, but has not been submitted to voting in congress, despite the urgency suggested in its name. With the municipal elections further slowing down the congressional agenda in November, Maia is sceptical of the PEC being approved by the end of 2020. He expects to have to suspend the January recess for there to be any hope of approving first this PEC, and then the budgetary guideline law (LDO) within the first month of 2021.
The Lei de Diretrizes Orçamentárias (LDO), which the government must submit to congress by mid-April, is the law which outlines the budgetary guidelines for the following year. Congress is usually bound to approve it before the July recess, but it failed to do so this year due to the coronavirus pandemic’s impact on congressional activity (mixed committee meetings were suspended). For the first time ever, the government submitted a draft budget (PLOA) in August without the LDO having been approved. In October, the treasury secretary, Bruno Funchal, warned that the government would be forced to suspend expenditures, including pensions and benefits payments, if the LDO was not approved by the start of 2021. “They [congress] have to vote, there’s no other way,” he said.
Economic uncertainty
Maia’s criticisms also extend to the Bolsonaro government, whose lack of clarity and consensus on its economic and fiscal plans casts further uncertainty over next year’s budget – particularly in light of the costs generated by the Covid-19 pandemic. In recent months, the government has see-sawed over the creation of a new social programme and how it might be financed [WR-20-39], while failing to present a cohesive line on its commitment to fiscal rules. “We don’t know what the government wants, what the government will propose,” Maia said during the Valor event. He added that Guedes is “almost alone” in government in defending the constitutional spending cap.
Maia also said that he feels more pessimistic about Brazil’s economic outlook now than he did in July. GDP forecasts for this year have improved since then – to around -5%, far less catastrophic than initially predicted – leading Guedes to stress that Brazil is on track for a ‘V-shaped’ recovery from the pandemic-induced economic crisis. But other indicators, to which Maia refers, paint a gloomier picture. Gross government debt rose to 90.6% of GDP in September, the central bank reported on 30 October, while the public sector deficit rose to almost 14% of GDP in the 12 months to September. Meanwhile, unemployment reached a new high of 14.4% in the June-August rolling quarter, as more working-age Brazilians rejoined the workforce in search of employment.
With the government’s pandemic-related stimulus measures – including the monthly ‘emergency basic income’ handout which was credited with mitigating GDP contraction in the second quarter and keeping millions out of poverty – due to come to an end in December, there are concerns over a slowdown in the recovery and a potential social collapse. Even the International Monetary Fund (IMF) recommends that the G20 economies “keep spending” next year, although it admits that fiscal constraints are a concern, which calls for the “re-prioritisation of spending” – something which is difficult for Brazil under its strict budget rules.
World Bank loan
On 29 October, the World Bank (WB) announced that it had approved a US$1bn loan to Brazil, to go towards expanding the Bolsa Família conditional cash transfer (CCT) programme. According to the WB, the loan will allow the programme to reach a further 3m people, adding 1.2m families to the existing 13m beneficiaries. The WB cites citizenship minister Onyx Lorenzoni as saying that the expansion of Bolsa Família is part of the government’s efforts to mitigate the effects of the coronavirus pandemic. Most Bolsa Família beneficiaries have been receiving the emergency basic income during the pandemic (a monthly sum equivalent to around three times the average Bolsa Família transfer), but this handout is due to end in December.
Mexico: Unemployment Rate
