The Finance Minister said, on Monday (Nov 4), that the new measures would come out this week; Lula had 3 meetings on the topic
After at least 3 meetings on public spending cuts with the president (PT) this week, the government did not announce any new measures on the topic as was announced by the Minister of Finance, on Monday (Nov 4, 2024).
President Lula called meetings this week with several ministers to discuss the issue, but there is still no definition on the matter. There is still no sign of internal consensus in the government on the cuts and, before the announcement, the measures would still have to be discussed with the leadership of the Chamber and Senate.
The meeting this Friday (Nov 8) brought together 10 ministers from the economic team, Education, Labor, Health and AGU (Advocacy General of the Union). It lasted 3 hours. Here’s who was present:
- Geraldo Alckmin, Vice-President of the Republic and Minister of Development, Industry, Commerce and Services;
- Rui Costa, Minister of the Civil House;
- Fernando Haddad, Minister of Finance;
- Luiz Marinho, Minister of Labor and Employment;
- Simone Tebet, Minister of Planning and Budget;
- Paulo Pimenta, Minister of the Social Communication Secretariat;
- Camilo Santana, Minister of Education;
- Nísia Trindade, Minister of Health;
- Esther Dweck, Minister of Management and Innovation in Public Services;
- Jorge Messias, Attorney General of the Union.
REMEMBER
The 1st of the week was on Monday (Nov 4), at Palácio do Planalto. It was closed without a decision. The meeting began at around 3:30 pm and concluded at 6:50 pm – that is, it lasted 3 hours and 20 minutes.
One of the reasons for the difficulty in announcing the package is the need to cut or limit adjustments to social programs, such as the BPC (Continuous Payment Benefit) and unemployment insurance. Two other areas that may have limited use of resources are health and education. This type of measure has a political impact. There is resistance from Lula, the PT and left-wing parties that currently support the Planalto.
On Wednesday (Oct 30), the Minister of Labor and Employment, Luiz Marinho, will resign if there are cuts to benefits in his area. Marinho was asked by journalists if he would leave his post if the measures in the programs came to fruition. He responded as follows: “If I am attacked, it is possible. I never went. I’m saying that this discussion doesn’t exist. A decision without my participation in an issue of mine is an aggression”. The minister was called to the meeting on Monday.
After 2 more meetings with sectoral ministers during the week without a definition, they point to Lula’s difficulty in untying the government’s internal knots in order to make more structural changes, which would result in a greater fiscal impact.
On Thursday (Nov 7), after a 5-hour meeting suspended at the end of the day without announcement, the Minister of Social Development, Wellington Dias, said that Lula would never accept cutting benefits from those who meet the legal requirements.
“We won’t, at MDS [Ministério do Desenvolvimento Social]cut no 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 stated.
Internally, the government wants to give the impression that there is no war between the Treasury and the rest of the Esplanada. The continued unresolved meetings and public statements by the affected ministers point in the opposite direction.
According to Haddad, all ministers have the task of strengthening the fiscal framework, predictability and sustainability of finances in the medium and long term.
“I think there is a consensus around the principle and, based on this feedback, the president forwards the address to Congress”he stated on Thursday (7.nov).
Before sending the measures, however, Haddad said that, “possibly”the president will meet with the president of the Chamber, deputy (PP-AL), and the president of the Senate, (PSD-MG). This fact may also have contributed to the lack of announcements this week.
Amid a period of informal silence, with economic ministers not commenting on numbers and the measures that are on the table for new cuts, the Treasury had to deny, on Thursday (7.nov), that the government is considering reviewing R$15 billion in spending linked to health and transport.
A piece of news circulated in part of the press with the supposed information, adding that there would be another measure worth R$10 billion in development. “Such information does not correspond to what has been debated among the economic team”said the organization in a note. Here is it (PDF – 50 kB).
EXPENDITURE REVIEW
Ministers have invested in a speech on the expenditure review since June. But few structuring and concrete measures were presented. There are doubts about what will actually be done and the market has put pressure on the economic team.
The government has committed to balancing public accounts in 2024. The objective is for expenses to be equal to revenues – a zero deficit is expected. In practice, it is necessary 1) increase revenue and 2) reduce expenses. However, little was done on the side of the 2nd option.
Lula’s team waited for the end of the electoral period to announce the proposals. Financial market agents expect a robust package to reduce the expansion of mandatory expenses. The BPC, unemployment insurance and salary bonus may be subject to changes.
O Poder360 already that changes to defense insurance and salary bonuses are on the radar.
The government announced a to make adjustments and combat fraud, but changes in the job market in recent years require structural measures. The economic team’s mission is to convince President Lula’s allies that the redesign is a gain for society.
The Ministry of Planning and Budget has not yet released 3 of the 4 axes of the spending review program. The topic is a priority for the economic team as soon as the tax reform is approved in Congress.
The spending review agenda is ahead of income tax reform on the economic team’s list of priorities. The Minister of Finance, indicated that the to cut expenses.
The 1st axis of spending review was the announcement of a fine-tooth comb in social programs that could yield R$26 billion to the government. The following actions remain:
- Integration of public policies (axis 2) – improvement of the design to avoid waste and increase coverage;
- Modernization of links (axis 3) – slows down the inertial growth of mandatory and other expenses;
- Review of Union subsidies (axis 4) – eliminates or reduces tax benefits with attention to regressive tax benefits.
Axes 2 (integration of public policies) and 3 (modernization of links) are the points of greatest resistance from allies of the Lula government, because they change the rules of social benefits. The economic team argues, however, that it will take an effort for Brazil to achieve investment grade in the coming years.
In an interview with Poder360Treasury Secretary Rogério Ceron, that the government needs to take a closer look”consistent” for expenses.
“The current government is aware that it has to take advantage of this opportunity. This creates alignment so that everyone acts coherently and together to achieve this goal. The National Congress certainly also understands the importance. […] He will certainly be available to build a State agenda that allows the country to recover its investment grade”, these.
