The End of the Spending Cap and the Budget for 2022

BRAZIL ECONOMICS - Report 22 Dec 2021 by Affonso Pastore, Cristina Pinotti and Paula Magalhães

The approval of the budget for 2022 made obvious what observers already knew. The spending cap rule was shattered, but not only to help the poorest households. The creation of the Auxílio Brasil program to replace Bolsa Família was the Trojan horse of the battle over spending. The moratorium on payment of judicial credit warrants (precatórios) and changes in the rule for indexing the spending cap assured an extra R$ 113 billion in expenditures, of which little less than half (R$ 54 billion) will be distributed as Auxílio Brasil (with a total of R$ 89 billion, similar to social spending in 2021). In this report we describe the routes taken to achieve these alterations. The capture of the budget by the president and favored lawmakers to serve their electoral interests and projects made the destruction of the fiscal framework definitive, at a huge cost to the Brazilian economy and society as a whole.​

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