Brazil's Federative Pact Proposes Significant Changes to State

Measures will affect government worker salaries, pass on US$100 billion to state and cities and weaken BNDES


President Jair Bolsonaro (PSL) and Minister Paulo Guedes (Economy) sent to the Senate a package that proposes the most extensive restructuring of the Brazilian state in decades, according to economists.

Three PECs (proposals to amend the Constitution) were delivered. One of them foresees a reduction of up to 25% of the workload and salary of Union, state, or municipal employees if they enter a fiscal emergency.

FILE PHOTO: Brazil's President Jair Bolsonaro greets Brazil's Economy Minister Paulo Guedes during a meeting to deliver the economic reform package at the National Congress in Brasilia, Brazil, November 5, 2019. REUTERS/Adriano Machado/File Photo - REUTERS

In this scenario, readjustments, job creation, and public tenders would be slashed.

Guedes estimates to save R$ 50 billion (US$ 12 billion) over ten years, including the reduction of tax benefits.

In the PEC of the federative pact, R$ 400 billion (US$ 100 billion) would be transferred from the Union to states and municipalities in 15 years. The proposal also cuts from 40% to 14% the portion of FAT (Worker Support Fund) for BNDES.

The package will likely encounter resistance in Congress. To pass a PEC requires 49 of the 81 senators in two shifts. In the House, also in two sessions, 308 of the 513 deputies are needed.

Translated by Kiratiana Freelon

Read the article in the original language