President Luiz Inácio Lula da Silva sanctioned, with several vetoes, the project that creates the Program for Full Payment of State Debts (Propag). The Minister of Finance, Fernando Haddad, had already announced last week that the Planalto would veto all devices with an impact on the Central Government’s primary result.
As shown by Estadão/Broadcast this Monday, 13th, the president of the Senate, Rodrigo Pacheco (PSD-MG), indicated support for Lula’s vetoes on the project. Pacheco met on Monday with Haddad, the Minister of the Civil House, Rui Costa, and the government leader in Congress, Randolfe Rodrigues (PT-AP), at the Official Residence of the Senate Presidency. Government members said that the essential aspects of the project approved last year would be maintained, such as reducing interest rates, extending debt and using assets to reduce debt.
As the report said last week, Lula vetoed the article that allowed governors to use resources from the National Fund for Regional Development (FNDR), created by the tax reform, to reduce a portion of the State’s debt with the Union. Estadão/Broadcast showed As recently as August last year, the device caused “strangeness” to the economic team.
“Despite the good intentions of the legislator, the devices incur a defect of unconstitutionality by violating the provisions of article 1. 159-A of the Constitution, due to the provision of restrictions on the receipt of resources from the National Fund for Regional Development – FNDR, resulting from the possibility of fulfilling the debts of federative entities with the Union through the partial or full assignment of the flow of receivables from the said Fund, which is why the veto is imperative”, highlighted Planalto, in an order published in the Official Gazette of the Union (DOU).
As Estadão/Broadcast also said, the government vetoed the section that allowed entities to deduct a portion of their liabilities with the Union if they carry out expenses, such as works, originally the responsibility of the federal government.
“The device incurs an unconstitutionality defect, as it allows the Union to assume obligations from past years without the prior formalization of agreements, through agreements, transfer contracts or partnership terms, which would generate legal uncertainty and result in the foregoing of revenue, compromising the financial balance of the Union and contradicting the provisions of art. 113 of the Transitional Constitutional Provisions Act and in art. 132 of Law No. 15,080, of December 30, 2024. Furthermore, the lack of clarity in the separation of responsibilities between federative entities encounters great difficulty, since many responsibilities fall under concurrent competence, making it difficult to define those responsible and the degree of responsibility for a certain work”, explained Planalto.
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Lula also vetoed the articles that allowed States registered in the Fiscal Recovery Regime (RRF) – Rio de Janeiro, Rio Grande do Sul and Goiás – to accumulate benefits with Propag, as this would “increase the fiscal impact of the Program for the Union ”. Another vetoed article exempted States that requested to join Propag from meeting the goals already agreed in the RRF. The president also vetoed an article that suspended the triggers of the Fiscal Responsibility Law (LRF) in case of violation of personnel spending limits by States.
