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Analysis: Budget bill will be adjusted due to elections

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Vincent

In the year when President Jair Bolsonaro is trying to win reelection, the economic team is sending to Congress a fictitious budget proposal that does not consider the cash-transfer Auxílio Brasil, intended to replace Bolsa Família with larger handouts, or even higher spending on minimum wage, pensions and retirement - which is expected due to the use of inflation estimates lower than market forecasts.Economy Ministry officials repeated Tuesday, when they presented the 2022 budget bill, that the blueprint will be revised throughout the year: either by lawmakers or by amendments.In defense of the proposal, Federal Budget Secretary Ariosto Culau said that "there is no budget Pix" where you press a button and the estimates of economic indicators are automatically updated, citing the Central Bank’s instant-payment system. The whole time the economic team tried to show that the budget is not fictitious.The fact is, however, that the proposal will be adjusted and the question mark is whether the economic team will be able to contain the pressure for new spending that will gain steam throughout the year despite the spending cap and elections.Asked about the risk of Congress cutting appropriations for mandatory spending to include amendments by lawmakers, the special secretary of the Treasury and Budget, Bruno Funchal, commented that there was a "learning curve" with this year’s budget. "There is no room for reduction in mandatory spending."Civil servants will press for salary raises. The lobby in Congress for the extension until 2026 of the payroll-tax cut, which ends this year, is expected to grow. Keeping the tax exemption in place for a longer period would have a fiscal impact of about R$5 billion.It is also almost certain that lawmakers will move to increase the electoral fund, which, for now, will have R$2.1 billion. The budget bill doesn’t even earmark funds to get off the ground the youth employment generation program advocated by Economy Minister Paulo Guedes in case a provisional measure about the suspension of labor contracts is passed. It still...

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