Without an agreement with the STF, discussions on court orders transform exit via the Judiciary into PEC – 09/20/2021 – Market

Negotiations between the Executive and the Legislature on the imbroglio of precatório started to focus on transforming the solution that made payments via a resolution of the CNJ (National Council of Justice) more flexible into a PEC (Proposal for Amendment to the Constitution).

The idea is to take the text that would be applied through an agreement in the Judiciary, but which encountered resistance in the STF (Supreme Federal Court), to be approved in Congress.

For this, even the possibility of replacing the content of the PEC sent by the government in August, which aims to divide the precatório, with the new text, is being analyzed. This PEC is being processed in the Chamber and has already passed through the CCJ (Committee on Constitution and Justice).

The solution via the CNJ resolution had been discussed with members of the STF and the TCU (Court of Accounts of the Union), but it did not gather consensus even before President Jair Bolsonaro’s threats to the Court on September 7th – later it was even more harmed after a interlocutor stated that the subject had become a detail in the midst of what was called a fire in a nuclear power plant.

Even if it went ahead, the exit via CNJ could also be questioned in the future in the STF itself. Gilmar Mendes, STF minister, reinforced this view in an interview with sheet by signaling that the Court could not be responsible for a seam in this regard.

“I don’t think we are the ‘locus’ for this type of issue, initially,” he said. “At some point, whether this is formulated by Congress or whether it is formulated by the government, this will end up being questioned and will come here, for us to deliberate”, he added.

Minister Paulo Guedes (Economy) saw the proposal via the Judiciary as simpler and quicker to resolve than the PEC sent by the government itself in August.

But, given the legal resistance to this arrangement, it has come back to depend on Congress for its plan – which is to make the bill of R$ 89.1 billion in court-ordered payments in 2022 more flexible and to find budget space for other expenses (such as the new Bolsa Família ).

The difference between the two proposals is that the government’s PEC would create a mechanism for installment payment of precatório within ten years and would generate a budget space of R$ 33.5 billion in 2022.

The solution via the Judiciary would create an annual payment limit for court orders, which would correspond to the amount paid in 2016 (year of creation of the spending ceiling) adjusted for inflation. This would, in principle, result in an even larger space than the Executive’s PEC – of R$ 49.2 billion next year.

The amount obtained in this case would already be enough to pay extra expenses of R$ 20 billion with inflation and another R$ 20 billion with the expansion of Bolsa Família (according to approximate numbers used by economists).

In the case of inflation, the 2022 Budget draft was sent with an estimate of 6.2% to the INPC (Extended National Consumer Price Index) in 2022, but prices continue to climb – and the percentage closed at the end of the year is going to determine the readjustment of mandatory expenses. The government is already talking about an expense of BRL 16 billion to BRL 18 billion above the projected budget proposal

But the proposal could even free up more spending than necessary for inflation and Bolsa Família. This is because at least one of the versions of the text under discussion totally removes the R$ 89.1 billion from the spending ceiling in 2022.

They press for an exit that frees up more spending from the demands of the political class for resources. As the sheet, analysts have already identified pressure on the spending ceiling of approximately R$72 billion.

This account includes not only inflation and the new Bolsa Família, but also the so-called rapporteur’s amendments (R$ 20 billion), the exemption from the payroll of companies (up to R$ 10 billion) and the electoral fund (more R$ 2 billion). The numbers were compiled by Samuel Pessôa, a researcher at FGV (Fundação Getulio Vargas), in an article.

“The difficulty is to find a way to establish an extra-tect spending for 2022 without the perception of decoupling of the fiscal policy. In ‘farialimés’, the puzzle is to find a positive way to build the Budget,” stated Pessôa in the article, in reference to the Faria Lima avenue in São Paulo (headquarters of different financial institutions).

“When there is distrust in relation to public solvency, the exchange rate depreciates, the interest curve inclines — because people charge a higher premium for raising the maturity of a public bond,” he said.

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