Law scholar says fiscal backpedaling is ground to impeach Rousseff

Law scholar Miguel Reale Jr. has said fiscal backpedaling is enough reason for prosecuting President Dilma Rousseff for impeachable offenses. As one of the petitioners in the ongoing impeachment case against Rousseff that is under consideration by the Chamber of Deputies, he said at a hearing with the special committee on impeachment that Rousseff violated the Fiscal Accountability Act by delaying transfers to state banks.

Reale Jr. argued that fiscal backpedaling is a “malicious accounting practice that has covered up the fiscal deficit by untimely reporting expenditures to make the primary surplus look larger. This is illegal, and very seriously so,” the lawyer said, referring to delays in government transfers to state banks to fund the payment of welfare benefits including Bolsa Família conditional cash transfers, unemployment insurance, and employee bonuses. Despite the government's delays, the welfare recipients got paid on time by the state banks from their own funds, which impeachment sponsors argue violates the Fiscal Accountability Act that prohibits state-owned banking institutions from carrying out credit operations with their controlling stakeholders.

Reale Jr., who served as justice minister under former president Fernando Henrique Cardoso, said although fiscal backpedaling has been a practice in previous governments, Rousseff's case is different in that the transactions involved large amounts. Moreover, he claims, it has led the financial market to lose confidence in Brazil's economy and created inflationary pressures in the medium term. “Fiscal austerity is a key part of public administration and a cornerstone of a country's economy, and when it is broken, it creates a domino effect that results in inflation, recession, and unemployment. This means they [the government] have misused an asset that was only achieved through a lot of effort, which is fiscal balance,” he said.

The impeachment petition was filed by Reale Jr. along with lawyers Hélio Bicudo and Janaína Paschoal, and accepted by the Speaker of the Chamber of Deputies, Eduardo Cunha, on December 2. They are calling for Rousseff's removal from office based on the so-called “fiscal backpedaling” practices in 2014 identified by the Court of Audits (TCU). They also say Rousseff was reckless by passing six decrees authorizing extra costs in a scenario of fiscal constraints and allege the fiscal backpedaling practices continued into her second, current tenure that began in 2015.

The decrees, which were signed by the president on July 27 and August 20, 2015, authorized the government to spend an extra $692 million above budget. According to the impeachment petitioners, the president should not have created extra costs knowing that the government would be unable to meet the primary surplus target set in the budget.

The government contends that the 2015 government accounts have not even been examined by the Court of Audits and the Joint Committee on Budget, and thus there are no grounds to press impeachable charges for fiscal noncompliance.

Translated by Mayra Borges