The camera deputies of Brazil approved a new fiscal rule promoted by the government of the leftist Luiz Inacio Lula da Silvawho celebrated this legislative victory this Wednesday, key in the way to replace the law that puts a ceiling on public spending.
The deputies approved the initiative on Tuesday night, with 372 votes in favor and 108 against, paving the way for road to government to raise public spending with social programs.
This is the first legislative victory in Lula’s administration, although the House has yet to vote on amendments to the bill, which must then be approved by the Senate.
“It was a resounding vote,” Economy Minister Fernando Haddad said at a press conference on Wednesday..
“The Chamber has shown that it seeks an understanding to help Brazil recover more significant growth rates,” he added.
The markets received the news with less optimism: the Sao Paulo Stock Exchange opened lower, and was operating with a loss of 0.92% at 19:40 GMT, although analysts also attributed it to the impact of external factors.
End to Michel Temer’s spending ceiling
The new tax rule puts end to spending cap of the government established in 2016, under the administration of the then center-right president Michel Fear, which only authorizes an adjustment in spending to keep up with inflation.
The new regime conditions the increase in spending to the increase in public collection and allows an increase of up to 70% of the increase in income from the previous year.
The government maintains that higher spending will help address pressing social needs and strengthen growth in Latin America’s largest economy, which expanded 2.9% in 2022 although it contracted 0.2% in the fourth quarter.
Lula, who already presided over Brazil from 2003 to 2010, returned to office in January promising to restore popular social programs launched during his first presidency, many of which were cut under Temer (2016-2018) and far-right Jair Bolsonaro (2019). -2022).
But Brazil’s economic outlook is far less favorable than in the 77-year-old former metalworker’s first two terms, when Chinese demand for exports of Latin American raw materials fueled breakneck growth.
Lula has tried to reassure the markets by saying he will not allow public spending to skyrocket, and promising a balance of “fiscal, social and environmental responsibility.”
Source: Ambito
