Given the government’s political weakness and the succession of blunders in the recent weeks, it would be impossible to present a coherent and viable set of proposals to rebalance the budget.
To recap: only in the final week of 2016 Budget preparation the PT administration informed publicly that the counts wouldn’t match without the resurrection of the CPMF (Provisional Contribution on Financial Transactions) –a month before, balance had been promised in the Treasury cash without that tax, which rests upon financial transactions.
With the expected widespread rejection of the idea, the Brazilian government decided to present a deficitary budget proposal. The dollar soared, and the government decided to make a kind of rectifying declaration on its text. Halfway, a risk rating agency took the country its good paying stamp.
An alternative left was to return to CPMF, now accompanied by an improvised set of measures and the hope that, once the fear of an economic wreck is established, Congress will be forced to pass something.
From all that has been presented, only the “provisional” contribution is palpable: financial transactions become more expensive with the tax and this undermines the efficiency of the economy, but it is easy to charge and almost impossible to evade.
The measures listed to reduce expenses are there too because, politically, the executive branch is being required to have an act of austerity to legitimize another bill handed to taxpayers.
For that, the main initiative was the postponement of wage increases negotiated with public employees, which should feed strike movements on the Esplanade of Ministries.
There are cuts that are somewhat uncertain in the PAC (Growth Acceleration Program) and public health, with the expectation that congressmen and senators recompose the funds with money reserved for parliamentary amendments to the budget.
Concerning “Minha Casa Minha Vida” programme (“My House My Life”), there was an unorthodox trick: passing to FGTS, a fund consisting of cash from private sector employees, part of its expenses.
In addition, there is a potential focus of conflict with the business entities: the transfer of almost a third of the revenue of the S System to the INSS (National Institute of Social Security).
All in all, the 2016 Budget continues with higher than planned expenses for this year and the much-expected reduction in the number of ministries and positions –not detailed until now– will produce a tiny saving.
Attention is being drawn to the rampant deficit of Social Security, the new destination of money from the CPMF, and there is a seek to preserve the poorest. But you can’t prevent taxes rising from hindering investments and job creation.