Transitional government sees political and legal challenges to expand Budget

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In order to break one rule, you cannot disregard all the others — any institutional design that crosses a boundary must have a responsible foundation.

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It is on this balance that the transitional government has balanced itself in recent days. Between necessity and justifications, President-elect Luiz Inácio Lula da Silva (PT) needs to deal with a series of laws in force to release resources from the Budget, and it is not just about the spending cap.

This includes the Golden Rule — which prohibits borrowing to spend on current expenses —, the definition of targets for the primary result and the Fiscal Responsibility Law. These are barriers that have been weakened in recent years, but that the next government needs to mend.

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To fulfill his campaign promises, President-elect Lula has two options. The first of them would be to create a Proposed Amendment to the Constitution — the already named PEC of Transition — and spend political capital now, with a Centrão that commands the two houses of parliamentary representation, especially the Chamber, still very much aligned with the current president Jair Bolsonaro. (PL).

The second option has a legal risk: upon taking office on January 1, the next government would publish a Provisional Measure the very next day that would likely exceed constitutional limits, such as the Golden Rule and the spending ceiling. The Federal Audit Court (TCU) has already turned a blind eye, but the Civil House Ministry, led by Ciro Nogueira, has already shown itself to be less inclined to follow the same path.

There are 40 days of the National Congress year-end recess, the transition team sees a head-to-head with a day and time to end. After that period, the only way out will be to take the risk of not even having room for anything in the Budget, not even maintaining Auxílio Brasil at R$ 600.

This whole context increases the pressure for an answer that Lula refuses to give: who will be the right name to command the government’s Economy portfolio?

Although it is not yet known who the “guarantor” will be, two things are certain: there is no room for everything in the Budget and the financial market, despite all these doubts, will continue in purchase mode, as Brazil has become , among the emerging ones, a kind of safe haven.

In this Monday’s episode (7), CNN Money discusses the challenges of the budget transition team, in addition to the behavior of national and international markets.

Presented by Thais Herédia and Priscila Yazbek, the CNN Money presents a balance of news issues that influence markets, finances and the direction of society and the dynamics of power in Brazil and in the world.

*Posted by Tamara Nassif

Source: CNN Brasil

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