Bolsonaro approves Brazil’s federal budget law for 2021 with vetoes

RIO DE JANEIRO, BRAZIL – Brazil’s President Jair Bolsonaro sanctioned the federal Budget this Thursday, April 22, the last day he was empowered to do so. He vetoed some passages of  the Annual Budget statute passed by Congress.

The sanction, confirmed Thursday night by the Planalto Palace and published in the Federal Gazette on Friday, aims to unblock the federal accounts and respect the vetoes that the Executive and Legislative branches had agreed on before its sanction.

For three and a half months, the country was complying with the execution of mandatory expenditures. Due to the limitation imposed by the lack of sanction of the law, some programs were not being carried out.

With the sanction, the Government will be able to allocate resources for measures to mitigate the economic impact of the coronavirus pandemic, which has left the country with almost 14.2 million confirmed cases and 385,000 deaths.

Among the initiatives to face the pandemic is the advance of the salary bonus for retirees and emergency programs to stimulate credit and employment, both shaken by the consequences of the health crisis.

Shortly before the sanction, in his weekly program through the Facebook network, Bolsonaro indicated that the “expected cut” in the budget was “quite large” for “all ministries” and that “everyone” should “pay the bill” in the face of the crisis.

Among the main measures is the “recomposition” of R$29 billion (about US$ 5.3 billion) in mandatory food allowances, as social welfare benefits, and the setting aside of another R$9 billion (about US$ 1.65 billion) as a reserve for the same purpose.

Another R$10.5 billion (about US$1.92 billion) of congressional earmarks was vetoed from the initial proposal, another R$1.4 billion (about US$256.6 million) from the proposals of the congressional budget committee, and R$7.9 billion (about US$1.448 billion) from the budget of federal ministries.

The authorization for new positions in the State Police of the Federal District and in the Fire Brigade of the capital Brasilia, both dependent on the federal government, was also vetoed.

Read: Moody’s rebukes Brazil for excluding pandemic spending from fiscal ceiling

Moody’s rating agency said Thursday that Brazil’s decision to “exclude” additional expenses related to the coronavirus pandemic from the fiscal ceiling is “negative” for the country’s credit profile.

The rating agency referred to the agreement between the Government and Congress so that the extra expenses related to covid-19 are not subject to the mandatory spending ceiling this year.

The exclusion of additional health expenditures from the fiscal ceiling was the formula found by the authorities to adjust the accounts for 2021 and include a series of mandatory items that had not been contemplated in the text approved by Parliament.

However, economic agents observe this type of shortcuts and fear that the country’s chronic fiscal crisis will worsen even more this year.

In 2020, the public deficit reached 14 % of Gross Domestic Product (GDP), and the debt reached record levels above 90 % of GDP.

This worsening of the fiscal picture was a consequence of the enormous disbursement made by the Government in 2020 to alleviate the economic effects of the coronavirus pandemic, with the distribution of, for example, subsidies that reached 68 million Brazilians.