The Transition PEC (Proposed Amendment to the Constitution) was evaluated by financial market experts and published in the newspaper O Globo this week, after entering Congress. According to analysts, the PEC needs to be “leaner” and should foresee the expenditure ceiling being exceeded by a maximum of R$ 96 billion.

The elected government of Luiz Inácio Lula da Silva (PT) presented a proposal that would allow spending R$ 198 billion outside the 2023 ceiling, guaranteeing the value of R$ 600 for the social benefit of Auxílio Brasil, which should be renamed Bolsa Família in 2023. However, financial market analysts consider the amount too “explosive” for the Union’s coffers.

On the other hand, senator Tasso Jerissati (PSDB-CE) presented a proposal in which he intends to raise the spending ceiling to R$ 80 billion in 2023, less than the calculation of the transition teams, and thus, allowing the maintenance of Auxílio Brasil in R$ 600 next year.

Nelson Barbosa, former minister and member of the transition team, defended R$ 136 billion as being an acceptable value, as it would not cause interference in the spending/GDP ratio.

According to a report sent to the market by economist Pedro Schneider (Itaú), R$ 96 billion should be enough to fulfill President-elect Lula's promise without the need for uncontrolled increases in public debt.

“The R$ 198 billion (1.9 % of GDP) proposed in PEC 32/22, currently being processed in the Senate, points to a significant fiscal expansion next year“, said the report. 

According to the document, the amount of R$ 96 billion “is more than enough to finance the main campaign promises and avoid cuts to some budget programs“.

The division announced by analysts should be as follows: 

“We warn that an increase in spending without compensation could lead to a significant increase in public debt and losses for society as a whole. We currently project a primary deficit of 1.5% of GDP in 2023 and a 4 percentage point increase in gross debt to 78% of GDP, with an already high allowance of R$ 100 billion (1.0% of GDP)“, says the document

“Taking the risk of an unbalanced evolution of government debt could lead to a new cycle of low growth, inflation and high interest rates, mainly harming those that the State should most protect", ends.

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