Amid significant political and economic developments in Brazil, President Lula (PT) is preparing to announce a much-anticipated spending cuts package aimed at ensuring the viability of the fiscal framework, despite delays caused by internal disagreements. The government also faces challenges related to transparency in budget allocations, with new rules granting greater power to party leaders over public resources, intensifying disputes in Congress. Simultaneously, the revelation of assassination plots targeting political figures and investigations into a parallel structure within the Abin during Bolsonaro’s administration has heightened tensions, strengthening opposition to proposals of amnesty for those involved in the 8 January attacks and broadening the debate on the need to reinforce the country’s democratic institutions.
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Spending Cut
On Monday morning (25/11), President Lula (PT) met with his economic team amid anticipation of the announcement of a spending cuts package expected this week. Lula called together the ministries that make up the Budget Execution Board (JEO), a body that advises him on fiscal policy decisions. For weeks, the government has been discussing a set of measures designed to ensure the fiscal framework’s viability in the coming years, a rule that limits expenditure growth. Part of the package will require Congressional approval.
Ideas in Debate
Among the measures under discussion are limiting increases to the minimum wage, changing the rules for military pensions, and modifying unemployment insurance. Last week, Finance Minister Fernando Haddad stated that drafts of these proposals would be presented to Lula on Monday to allow for the announcement of the measures.
Government Delay
Presidential advisors believe the government has wasted too much time in internal disagreements over the necessity of measures to cut spending and strengthen the fiscal framework. Consequently, the administration missed the ideal “timing” to launch the package, delaying its positive economic impact. Initially, the plan was to unveil the measures immediately after the municipal elections to influence the economic environment. For instance, the Brazilian real’s recent depreciation could have been mitigated, preventing inflationary pressures and reducing the Central Bank’s need to intensify its rate hikes. Now, the monetary tightening cycle may be longer than initially anticipated.
New Rules for Submitting Resources
Prompted by the Federal Supreme Court (STF) to revise criteria for budget amendments, Congress recently approved new rules granting more power to party leaders to determine public resource allocations. This change has escalated internal disputes among parliamentarians over who will assume these roles next year, with elections for new representatives looming. The approved legislation gives party leaders authority over the so-called committee amendments, estimated to be worth R$11.5 billion in 2024.
New Model
The new model for committee amendments was adopted after criticism about the lack of transparency in this budget allocation method. Since funds are sent to the city council and state on behalf of committees, the true sponsors of these resources often remain unidentified. Experts argue that the new framework still falls short of the transparency standards mandated by the STF.
Impacts on Congress
The revelation of an alleged plot to assassinate Alexandre de Moraes, Lula, and Geraldo Alckmin has shaken Congress more than the disclosure of the 37 individuals indicted for attempting a coup in 2022, according to lawmakers. While many names on the Federal Police’s final list were expected, the existence of documents, messages, and field operations aimed at physically eliminating an elected president took most by surprise. The revelation of this assassination plot, alongside the indictments, has strengthened Congressional opposition to proposals granting amnesty to participants in the 8 January attacks on the three branches of government. It has also intensified resistance to forgiving Bolsonaro, who remains ineligible for office until 2030 due to Electoral Court rulings.
Parallel Abin
Following the conclusion of the investigation into the coup plot, the Federal Police aims to wrap up its inquiry into a parallel structure within the Brazilian Intelligence Agency (Abin) by the end of the year. These structures monitored and targeted opponents of Jair Bolsonaro’s administration. The investigation focuses on former Abin director and current federal deputy Alexandre Ramagem (PL-RJ), federal police officer Marcelo Bormevet, and army sub-lieutenant Giancarlo Gomes Rodrigues, all of whom held senior positions at the agency. The trio is already listed among those indicted in the inquiry into the coup plot, which sought to keep Bolsonaro in power and block Lula’s inauguration.
Analysis:
Brazil’s political and economic landscape is currently at a critical juncture, characterized by debates over fiscal sustainability, governance challenges in Congress, and institutional tensions heightened by investigations into alleged coup attempts. The highly anticipated spending cuts package announced by President Lula (PT) is an effort to reaffirm commitment to fiscal responsibility, yet it faces two main challenges: internal political strain and lost economic timing.
The delay in the articulation of these measures reflects internal government disagreements regarding the necessity and impact of the proposals. Furthermore, the decisions come at a time of a depreciating reality, which is fueling inflation and prompting the Central Bank to adopt a more aggressive monetary policy. These consequences could have been mitigated with quicker implementation. The government is now racing against time to minimize economic damage and restore confidence among markets and political actors.
In the legislative realm, the approval of new rules for commission amendments has intensified internal power struggles within Congress. While efforts to enhance transparency were made, the change that strengthens party leaders has ultimately concentrated more power, exacerbating tensions among lawmakers. This highlights a frequent paradox in Brazilian politics: attempts to modernize processes often result in stopgap solutions that fail to break with centralizing and opaque dynamics.
Additionally, the impact of investigations into coup plots and parallel structures within the Abin goes beyond legal matters, strengthening discussions about Brazil’s democratic resilience. The revelation of plans involving political assassinations not only increased opposition to amnesty for those involved in the January 8 attacks but also reopened debates about institutional fragility in handling internal threats.
Sources: G1 [1], [2]; O Globo [1], [2]; A Folha de SP.
