Negotiations to close the government’s spending cut package continue this Friday (8) with an impasse between the economic team, President Luiz Inácio Lula da Silva (PT) and social ministers. The expectation that there would be a definition on Thursday (7) did not materialize and a new meeting will be held at 2 pm to try to unlock the discussion.
According to the president’s official agenda, this new round of negotiations will have, in addition to the economic team, ministers Camilo Santana (Education), Luiz Marinho (Labor) and Nísia Trindade (Health), who should be affected by the cuts. Carlos Lupi (Social Security) is not yet confirmed – he threatened to resign if his ministry joins the cuts package.
As there was no agreement this week, although minister Fernando Haddad (Finance) said that everything was already in order, he and Simone Tebet (Planning) had to cancel trips they were going to take this Friday (8). Now, there is the expectation that a definition should be published by tonight.
Meanwhile, the financial market is keeping an eye on what should be disclosed. During Thursday (7), with the expectation that there would be some announcement, the São Paulo stock exchange share index – B3 – operated on the rise. But, with the lack of any definition of the package, it retreated and closed down 0.5%, and the dollar rose to R$5.69.
In the evening, Minister Wellington Dias (Social Development), responsible for the payment of Bolsa Família and the Continuous Payment Benefit (BPC), released a note informing that no benefits will be cut. There was the prospect that the BPC could have a considerable reduction.
“We will not, at the Ministry of Social Development, cut any benefits for those entitled to Bolsa Família and BPC. On the contrary, President Lula’s order is to guarantee the right to those who have the right, those who are outside and in food insecurity and to remove Brazil from the Hunger Map and we are doing it”, he said.
President Lula himself also complained about the need to cut government spending, even with the R$105 billion hole in this year’s public accounts that needs to be reduced.
“I am in the process of a very serious discussion, because I know the market discourse well, the speculative greed of the market”, he added. “Will businesspeople who live off government subsidies accept giving up a little subsidy so that we can balance the Brazilian economy? Will you accept? I don’t know if they will accept it,” he said in an interview with RedeTV.
He also signaled that he would like parliamentarians to waive part of the amendments to help with the government’s accounts. This year alone, these resources reached R$49.2 billion.
“If I make a spending cut to reduce the Budget’s investment capacity, the question I ask is the following: will Congress agree to reduce the amendments from deputies and senators to contribute to the fiscal adjustment that I am going to make? Why not just take it out of the government budget”, he added in the same interview.
The financial market predicts a minimum cut of R$50 billion, which could help reduce inflation in 2025 and improve the economic scenario in 2026.
Haddad has already announced that the cuts will occur to comply with the rules of the fiscal framework and may occur through a Constitutional Amendment Proposal (PEC) and a Complementary Law Project (PLP). Afterwards, he said, it will be up to Lula to negotiate with the presidents of both houses of Congress.
Although there is still no official proposal, the package will, in general terms, include the inclusion of mandatory government expenses in the rules of the fiscal framework, which limits the expansion of spending to 2.5% above inflation. If there is an increase above this level, an alternative would be to activate triggers to stop mandatory spending.
“What we are taking to the president is consistent with the thesis that we are defending, of strengthening the fiscal framework”, declared the minister, highlighting that he presented the country’s fiscal situation to the other ministers in the meetings that were held this week.
There is also the expectation that the fine-tooth comb on social benefits — such as the BPC — will be intensified and with stricter rules, such as the prohibition of accumulation and the need to provide proof of life annually.
