José Maurício Caldeira speaks out about approval of the Budget Guidelines Law

The approval of the LDO (Law of Budgetary Guidelines) by the brazilian Congress, in remote sessions in the Chamber and in the Senate in one of the last sessions of 2020, consolidated the market’s tendency to trust the premise that the country is moving in the right direction. The stock market has already recovered its losses for the year and the dollar has remained stable or fluctuated negatively. The LDO determines the basic rules for the execution of the 2021 budget, with estimated revenue and expenses.

The expenses will be detailed in the ABL (Annual Budget Law), which will be voted in 2021. “The vote on the budget law is fundamental for the balance of public accounts, especially after this turbulent period caused by the Covid-19 pandemic”, says José Maurício Caldeira, shareholder and member of the Board of Directors of Asperbras.

Caldeira recalls that public accounts suffered strong pressure in 2020 due to the confrontation of the pandemic. The Union had to resort to the so-called war budget to make unforeseen expenditures, including emergency aid, which exceeded the R$ 250 billion mark, paid to 67.8 million Brazilians. As a result, the public deficit reached R$ 700 billion. “The government’s investment was right as to avoid social chaos and guarantee the functioning of the economy. But now it is important that the government accounts fit within the budget”, says Caldeira.

Approved by the Temer government, the budget on public spending, which limits the spending of the three branches to the same values ​​as the previous year in real terms, has been one of the pillars of the economy’s credibility. Because of this fiscal anchor, Brazil today has the lowest interest rates in history and inflation under control. “Low interest rates and inflation at a civilized level are two factors that stimulate investments and help the business environment, which leads to GDP growth and job creation,” says José Maurício Caldeira.

REQUIRED REFORMS

But more needs to be done. In addition to the budget law, the Brazilian Congress will have a series of important votes to stabilize the fiscal crisis that should be implemented in 2021. The most relevant in the short term, according to economists, is the so-called Emergency PEC (Proposed Amendment to the Constitution) because it makes it possible to cut federal spending when certain limits are exceeded. If approved, this constitutional amendment will allow, among other measures, the reduction of public employees’ working hours and wages, the prohibition on the creation of new mandatory expenses and the limitation of tax benefits.

Another essential reform to consolidate the fiscal situation is the administrative one. This measure will have a longer-term impact, but is considered by specialists to be a necessary structural change to address the profile of public spending.

The government’s proposal changes rules for federal, state and municipal employees, but does not change the regime of those who already work for the state. The new rules will only be valid for those who start in the public service after the project is approved.

The government’s reform proposal creates different regimes, with the removal of stability in part of the careers in which the permitted layoffs would be the result of “underperforming”. The new regimes are:

– A regime of “typical State careers”, where there is public competition and stability, similar to the current model. There will be, for at least two years, a trial period that replaces the probationary stage. Servers with better performance will be hired. The functions that fall under this regime will be announced later by the government in a bill;

– An “indefinite term” regime. There, there is a public contest followed by a trial period of at least one year. This group will have flexible stability, and is subject to resignation in cases of need to cut costs or terminate the function due to technological advances;

– A group with a “fixed term contract”, that is, a temporary position. In this regime, there is no public tender. According to the Ministry of Economy, admission will be made in a simplified process. These servers must be hired for occasional and temporary demands, such as natural disasters;

– A “leadership and advisory position” group, in which there is no public tender or stability and the link is temporary. This group corresponds to positions of trust.

ELIMINATING THE UNNECESSARY EXPENSES

Another important aspect of the reform consists of eliminating the so-called “extras” which are advantages, benefits and mechanisms foreseen in public careers and which, in some cases, accumulate and lead to super salaries in the public sector.

Among them, the highlights are vacations lasting more than 30 days, retroactive increases and career progression based exclusively on length of service. The new rules also remove the possibility of compulsory retirement as a punishment for civil servants – considered a benefit disguised as a punishment.