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Government wants new trigger for spending adjustments

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The government wants Congress to pass a constitutional amendment this year that would allow fiscal-adjustment measures to be triggered whenever mandatory primary expenditures, or those that don't include paying down debt interest and principal, surpasses 95% of total federal primary spending, a high-ranking economic official said. A verification of compliance with this percentage would be carried out when drafting the annual budget.Putting this trigger in place, which would force adjustment measures, is being negotiated by Economy Minister Paulo Guedes and the heads of both houses of Congress, Deputy Rodrigo Maia and Senator Davi Alcolumbre. The trigger would not be valid only for the executive branch, but for all bodies in the legislative, judiciary, Prosecution Service and Public Defender's Office. Each of these bodies would have to adopt the adjustment measures should the trigger be tripped.

The rule is already included in proposed constitutional amendment 188/2019, known as the Federative Pact PEC, which is stalled in the Senate. The current administration thinks it made a mistake last year when it submitted two PECs addressing basically the same issue: 188 and 186. The latter became known as the Emergency PEC. The plan now is to merge the two and create a shorter text, but keeping those rules with an impact in the short, medium and long terms.

The rule that triggers adjustments when mandatory expenditures reach 95% of total spending is considered necessary "for the very short term," one source explained, because the government is having difficulties closing its annual budget proposal. This source said it would still be possible to conclude the budget for 2021 with a very significant...

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