Cities increase revenues by 24% in 4 years
The pandemic has accelerated a structural change in the reduction of personnel costs in municipalities, which, combined with revenue growth, has led to accelerated investment in recent years.The current net revenue of municipalities with more than 50,000 inhabitants increased by 24% in real terms between 2018 and last year. Personnel expenses - typically the main current expenditure of municipalities - increased at a slower pace, by 10% in real terms, in contrast to investments, which increased by 94%.This caused the share of personnel expenses in this group of cities’ net current revenue to fall to 45% in 2022 from 51% in 2018. Part of the space left was taken up by investments, which rose to 7% from 5% of turnover over the same period.Despite the economic outlook and the less favorable revenue picture for the second half of the current mayors’ terms, factors such as the electoral cycle, cash and cash equivalents, greater access to credit, and the effect of congressional earmarks may help to maintain investment at a relatively high level.The data, which was compiled by the Center for Metropolis Studies (CEM) of the University of São Paulo (USP) based on fiscal reports, showed that, overall, municipalities almost doubled their investments in real terms, to R$41.2 billion last year from R$21.3 billion in 2018.The study covered municipalities with more than 50,000 inhabitants. Although they represent only 10.7% of the total number of cities in the country, these municipalities are home to more than 60% of Brazil’s population. Out of a total of 616 municipalities in this population range in 2022, the study included 597 that provided the necessary data. The values for 2018 have been updated by Brazil’s official inflation index (IPCA).Although the economic slowdown and the effect of the reduction in the collection of the sales tax ICMS do not favor the picture of the municipalities as of 2023, Fábio Pereira dos Santos, an associate researcher at the CEM, said that other elements can help municipalities to maintain the relatively high level of investments. From the data available, he said, investments are unlikely to show the same accelerated growth as in the last years but could continue to rise more slowly. "Barring a very large recession, the level of investment in the current and next period is likely to remain higher than the previous period."One positive element that could help is the political cycle since the current mayors entered 2023 in...
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