New cash-transfer program raises controversy
Following a series of confusions about its new social program, the government has finally announced how it intends to fund the successor of cash-transfer program Bolsa Família. And it managed to cause new controversy and another round of selloffs in the local financial market.
The solution presented was a sharp cut of spending on court-ordered payments next year and the resumption of an idea that Congress had already rejected a few months ago: the use of part of the money of the Fund for Basic Education Development (Fundeb) to enable the program now called Renda Cidadã, or "Citizen Income."
The announcement was made after a 90-minute meeting at the Alvorada Palace, the president's official residence, of President Jair Bolsonaro, Economy Minister Paulo Guedes and government and allied-party leaders in Congress. They also announced that the new phase of the tax reform was pushed back, with no date yet, because of the political impasse around Mr. Guedes's proposal of funding payroll-tax cuts with a new tax on financial transactions.
Senator Marcio Bittar (Brazilian Democratic Movement, MDB, of Acre), rapporteur of two constitutional amendments proposed (PECs) by the government to adjust fiscal accounts, said he would put in the text of the so-called emergency PEC the limitation of writs of payments to 2% of the net current revenue and the use of up to 5% of Fundeb to associate childhood educational policies with the social program.
The stronger measure is of the writs of payment. Next year's budget sets aside R$54.7 billion for the payment of court sentences. Of those, more than half are related to Social Security and the social assistance benefits, while R$10.4 billion are related to spending on personnel. Other R$20 billion are expenses with court decisions of different issues. With the limiting factor, only R$16 billion will be paid in 2021.
The R$39 billion difference would be redirected to the social program, so that it can pay an average amount higher than R$200 - the figure will still be defined by the executive branch, but will not reach the R$300 that Mr. Bolsonaro wanted. In the case of Fundeb, the math is not so simple. The 5% represent about R$8 billion today, but the increase of funds is gradual over the years, so its impact is diluted.
The limit for court-ordered payments to 2% of current net revenues, one source says, was a choice of the government economic team, although some officials are also fierce critics of the proposal...
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