August 28, 2023
- The new fiscal framework introduced by President Lula da Silva in March 2023 was approved by the Brazilian National Congress, the first major legislative victory for the administration.
- Congress made adjustments to the text in order to reduce the framework’s main vulnerability: its over reliance on revenue increase.
- As a next step, the administration will likely continue to push its revenue-increase agenda to sustain the new framework while congressional leadership might opt for a debate on spending cuts, including a potential reform of the federal government payroll cost.
Analysis:
On Tuesday, August 22nd, the House of Deputies of the Brazilian National Congress held a final vote on President Lula da Silva’s proposed new fiscal framework for the country (discussed in this blog post). The bill was approved with 379 votes in favor and 64 against, a demonstration of the political strength of the Speaker of the House, an ally of President Lula.
The new fiscal framework is part of an economic policy focused on three main goals: fiscal stability to reduce inflationary pressures and allow the Central Bank to continue to reduce the benchmark interest rate (SELIC), tax revenue increase to sustain the new framework, and the approval of a major tax reform to simplify the Brazilian tax system on consumption (discussed in this blog post).
The approval on Tuesday is the first major legislative victory of the administration, that has seen more successes than losses in its initial months (discussed in this blog post).