By Anthony Boadle

BRASILIA, Reuters – Brazil’s government should have the ability to temporarily suspend a constitutional spending limit in order to spend it way out of economic crisis caused by coronavirus pandemic. A federal court judge (TCU), told Reuters.

Augusto Nardes’s review of Dilma Rafaff’s spending revealed that she had broken a law on fiscal responsibility. This led to her being impeached in 2016. In 2016, Augusto Nardes stated that the crisis was so severe that Congress needs to change the government spending limit.

Nardes stated that Brazil is currently experiencing a “social war” due to the pandemic. He suggested that Congress reach a National Pact for at least three years in order to restore economic growth.

Brasilia is now calling for less restrictions on government spending. This includes those once committed to fiscal discipline. The shift has rattled markets nL1N2RH29S, led Treasury officials to quit https://www.reuters.com/world/americas/brazil-stocks-currency-plunge-rate-futures-rise-fiscal-fears-2021-10-21 and forced the central bank to step up https://www.reuters.com/article/brazil-economy-rates/update-2-brazil-fiscal-fears-spur-more-aggressive-150-bps-interest-rate-hike-idUSL1N2RN3A9 the world’s most aggressive tightening cycle.

Rousseff was succeeded by Jair Bolsonaro, who amended the Constitution to restrict annual spending growth to the inflation rate. The Brazilian economy has shrunk 4.1% over the past year. President Jair Bolsonaro’s government now needs to come up with a plan to provide more cash assistance to 17 millions families affected by the pandemic.

Economy Minister Paulo Guedes suggested https://www.reuters.com/world/americas/bolsonaro-says-new-welfare-program-respect-brazil-spending-cap-2021-10-20 a loosening of the spending ceiling, and allies in Congress have proposed legislation to allow nearly 100 billion reais ($17.7 billion) of additional spending next year.

Nardes explained that the spending ceiling law could not be kept in this social conflict, but it is up for Congress to decide.

He added that “The Japanese and American are already increasing the debts of their creditors to help them out of this crisis.”

Nardes pointed out that while the U.S. is spending $3 trillion on infrastructure, Brazil only invests 60 billion reais. Japan’s spending is higher, even though its public debt stands at 200%, while Brazil has less than 100%.

Nardes indicated that on Thursday, he had suggested a nationwide pact to address the issue to Arthur Lira (lower House Speaker) and Rodrigo Pacheco (head of Senate).

Nardes stated that he was open to the idea of Bolsonaro’s latest proposal, privatizing Petrobras (state-controlled oil company Petrobras),

According to him, the court would assess any attempt to sell Petrobras to the government as it evaluates all concessions in Brazil. He also stated that there is a need to decrease the size of Petrobras.

It is impossible to maintain such a massive structure. Oil could be out of date in 10-20 or 30 years. Brazil should develop “sustainable alternatives”, he stated.

($1 = 5.6452 reais)