Economy Minister: Gov’t to retain spending cap

Brazil’s Economy Minister Paulo Guedes said today (Apr. 27) it will not be necessary to suspend the spending cap as the funds for the extra expenditures on health—as a result of the pandemic of the new coronavirus—are guaranteed. “Why talk about doing away with the spending cap if it’s exactly what protects us from the storm?” he argued next to President Jair Bolsonaro, while leaving a meeting at the Alvorada residence.

Guedes noted that the government has been using other tools to guarantee funding. After the recognition of public calamity by Congress, the Executive was exempted from meeting the surplus target. “Under the golden rule you can’t become indebted in order to pay current spending. But if there’s no money for health care, we can could break the spending cap, but that’s not the case,” he said.

In effect since 2017, the spending cap limits the increase in federal expenditures to the increase in the inflation reported in the year before. The measure is to be in force for 20 years.

Another program is expected to be approved by the Senate this week, Guedes said, to send funds to states and municipalities. On the other hand, the government has held talks with Congress regarding the suspension of pay raises for civil servants for a year and a half.

“We also need civil servants to show that they are on Brazil’s side, willing to make a sacrifice for Brazil, rather than staying at home with  a full fridge, watching as the crisis takes the jobs of millions of Brazilians. [Civil servants] will collaborate. They’ll refrain from asking for a raise for a while,” Guedes said, adding that no right will be revoked.

Reforms and investment

In Guedes’s view, Congress is pro-reform and backs the overhauls of President Jair Bolsonaro. Right now, he argues, because of the COVID-19 pandemic, the government is carrying out a reversal in politics, from structuring reforms to emergency measures, but investment should be resumed soon in such sectors as sanitation, oil and gas, infrastructure, and the electric and logistic sectors.

“This will be done as part of the fiscal recovery and stability program. We’re on our way to prosperity, not despair. We’ll increase salaries with the increase in productivity. We’re privatizing, opening the economy, increasing investment,” he said.

According to Guedes, forecasts showed that the country’s economy had been growing above two percent. “Brazil was taking off when the coronavirus crisis set in. This brings about this initial impact, the second wave but we know we’ll get through it. We want to reiterate to all of those who believe in the economic policy that it goes on, it’s the same economic policy. We’ll continue with the structuring reforms. We’ll bring billions in investment,” the minister declared.