The Ministry of Economy, led by Paulo Guedes, suffered a stampede last Thursday night (21). Four members of the second echelon resigned: Bruno Funchal, special secretary of the Treasury and Budget; Jeferson Bittencourt, secretary of the National Treasury; Gildenora Dantas, Deputy Special Secretary for the Treasury and Budget; Rafael Araújo, deputy secretary of the National Treasury.
The resignations came hours after a statement by Guedes, signaling the Jair Bolsonaro government’s (non-party) intention to “be reformist and popular” and the need for a “license” to break the so-called “Spendant Ceiling”.
:: Disband: four secretaries ask for the Ministry of Economy’s resignation on Thursday (21) ::
Approved by Congress and enacted in December 2016, the Spending Ceiling froze investments in social areas for 20 years, through the Constitutional Amendment (EC) 95. Since then, the increase in public spending has been limited to the variation in inflation.
Respecting the ceiling was, until last week, one of the promises made by Bolsonaro and Guedes to the financial sector. One year after the election, in a context of rising prices and decreasing average income for Brazilians, the government changed its stance.
“The government is proposing the so-called Auxílio Brasil, a proposal to replace the Bolsa Família, in the amount of R$ 400. As the government does not propose a source of financing, this pierces the so-called Spending Ceiling”, explains Leonardo Leite, professor at Faculty of Economics of the Fluminense Federal University (UFF) and of the Political Economy Nucleus of the UFF (NEP-UFF).
:: Will Auxílio Brasil be able to solve the country’s current challenges? Understand the Bem Viver Program ::
The article spoke with the economist about the context that resulted in the disbanding of the secretaries. In his interpretation, EC 95 was enacted to pave the way for a series of liberal reforms. The signal from Bolsonaro and Guedes is that reforms are no longer a priority, less than a year before the election.
“The Cost Ceiling entered the economic discussion in the Temer government [MDB]. He was basically a Trojan Horse to install liberal reforms. In other words, with the Spending Ceiling, running the economy would require reforms to reduce expenses of all kinds: social spending, social security rights, labor, administrative reform, to ‘adjust’ the public machine”, he says.
“The second echelon of the Ministry of Economy is abandoning the boat because the possibility of these reforms has diminished, with the signaling of the end of the Spending Ceiling.”
::From super-minister to badly regarded bureaucrat: why Guedes arrives weakened to testify at the Chamber::
The alternative proposed by the former secretaries was to fund Brazil Aid by taking money from workers who are also affected by the economic crisis and by the increase in the cost of living.
“What these economists [do segundo escalão] were proposing to replace this increase in spending was to cut the salary bonus for those earning up to two minimum wages. Another suggestion was to freeze pensions linked to the minimum wage for two years. In other words, cut out those who also need it”, adds Leite, citing backstage information collected by the newspaper Economic value.
“Seeing that it won’t happen, they jumped off the boat.”
The economist and professor at UFF concludes by recalling that, although late, the change in stance taken by Guedes and Bolsonaro on the Cost Ceiling is positive for workers.
“Clearly, Bolsonaro is thinking about elections. But this is a measure that really has to be taken, because we are going through a humanitarian crisis”, he emphasizes.
Bolsonaro appears in second place in voting intention polls for 2022, behind former president Lula (PT).
For Leonardo Leite, the profile of the secretaries who will assume the positions in the Ministry will be an important sign of the policy that the current government intends to adopt until the elections.
Brazil has more than 14 million unemployed, according to the Brazilian Institute of Geography and Statistics (IBGE). According to data from the research group Food for Justice: Power, Policy and Food Inequalities in Bioeconomy, headquartered at Universität Berlin, in Germany, 125.6 million Brazilians suffered from food insecurity during the pandemic. The number is equivalent to 59.3% of the country’s population.
Edition: Vivian Virissimo