PEC of the Federative Pact is a topic of debate at FGV
The seminar “PEC do Pacto Federativo” (“PEC of the Federative Pact”), held on April 26 by FGV’s EPGE Brazilian School of Economics and Finance, with the support of the Institute of Applied Economic Research (IPEA), brought together specialists to discuss the economic, legal and political drivers of the review of the current budget rules.
Professor Rubens Penha Cysne, from FGV EPGE, noted that the linking of revenues to certain expenditures is a common practice in several countries, but in Brazil, this fund was used in an exaggerated manner following the 1988 Constitution. He also commented that budget items that do not have any linkages – mainly infrastructure investments – tend to lack funds to cover them, which may generate bottlenecks to economic growth and losses for the population’s well-being.
The professor also pointed out that a budget that is hindered by linkages does not allow the state to adjust its budget execution to possible changes in public policy priorities that may occur over time. Additionally, Professor Rubens resubmitted his proposal, published in the newspaper O Estado de S. Paulo and on the Brazilian Economy Magazine, in 2007, to automatically allow budgetary disbursements once the objectives of each area, measured by private sector indices, have been served.
In turn, Carlos von Doellinger, President of IPEA, stressed that the divestment would recover the leading role of the Legislative branch in the planning and execution of budgetary resources. According to him, the greater prominence in the budget process would bring political gains to parliamentarians, as they would be able to allocate more resources to the demands of their constituencies. Thus, Doellinger believes that the bases for what he classified as a “cooperation-based presidential system” will be established, with the divestment allowing a better allocation of the financial resources of the state according to goals and priorities agreed between the Legislative and the Executive. The president of IPEA also noted that the parliamentary vision, which is closer to the local and regional realities, can in several cases feed more effectively the decision-making process regarding the allocation of funds.
Vilma Pinto, researcher at FGV’s Brazilian Institute of Economics (IBRE), presented a diagnosis of the deterioration of the subnational accounts and stressed the importance of regulating matters provided in the Fiscal Responsibility Act, such as the Fiscal Management Council. The researcher also recommended that progress be made in the regulation regarding the limitation of personnel expenses.
Finally, the researcher and sociologist Aspásia Camargo reviewed the concept of federalism and explained the context of the challenges for the Brazilian case. Camargo analyzed shared management experiences such as the Unified Health System, in which municipalities, states and the federal government have different duties. She also stressed the need for a clear definition of competencies and for the federal entities to have the financial and institutional capacity to meet their responsibilities.
Please visit the website for more information about the seminar.