MercoPress. South Atlantic News Agency

Brazil's Congress passes Constitutional Amendment regarding spending cuts

”Today we are delivering to Brazil savings of at least R$ 60 billion (around US$ 10 billion),” Senator Randolfe Rodrigues explained

Brazil's Congress enacted Constitutional Amendment 135/24 regarding the fiscal spending cut package, Agencia Brasil reported. The new legislation stemming from the Proposed Amendment to the Constitution (PEC) 45/24 made changes to mandatory revenues and extended the Untying of Union Revenues (DRU) in a move to improve the federal government's fiscal balance, it was explained.

Among the changes are those that make it possible to modify the cap on civil service salaries, the rules for granting the Continuous Cash Benefit (BPC), the salary allowance, the policy for adjusting the minimum wage, rules with limits for granting and extending tax benefits and limiting the growth of expenses linked to the fiscal framework.

When promulgating the amendment, National Congress Speaker Rodrigo Pacheco said that the goal of the change was to preserve fiscal cohesion, combining the legal regime of these expenses with the fiscal framework in force and the “global scenario in which Brazil is inserted.”

Approved by Congress in August last year, the framework sets limits on the increase in federal spending. “Fiscal responsibility has been consolidated as a national imperative, even in times of challenging economic scenarios, such as the present,” said Pacheco.

The senator also said that the changes made during the process of passing the bill through the House of Deputies and the Senate resulted in a text that reflects the plurality of world views and “legitimate interests represented in the National Congress.”

“Precisely for this reason, any inflammatory and counterproductive attempt to characterize the constitutional amendment as a type of measure contrary to the social interest and the most vulnerable sections of the Brazilian population must be rejected,” he said. “Quite the opposite, what was sought with the proposal and the adjustments promoted by the National Congress was more than simply reducing public spending, but improving it in qualitative terms, directing it in the most reliable and efficient way possible to those who need it most,” he argued.

The PEC's approval was part of the government's effort to control the growth of mandatory expenses, such as personnel and social programs. The approved text alters the PIS/Pasep program's salary allowance of up to one minimum wage, paid to workers who earned up to two minimum monthly wages in the previous year.

The approved change determines that the value of the PIS/Pasep allowance will only be adjusted by the INPC from 2026 onwards. The salary will be paid to workers who earned two minimum salaries in the base year, which will be 2023, equivalent to R$ 2,640 (US$ 433.75). The access wage will be reduced until it reaches one and a half minimum wages, which, according to the government's forecast, should occur in 2035.

Another change was to the rules of the Basic Education Maintenance Fund (Fundeb), which finances public education networks, from kindergarten to high school. The fund is paid for by the states and municipalities but receives a supplement from the Union when the entities do not reach the minimum amount per student per year.

The approved proposal limits the resources that must be allocated to full-time enrollment to 10% in 2025. For the following years, the rule established a minimum of 4% of Fundeb resources. This should be the case until the full-time education targets set out in the National Education Plan are reached.

About the Untying of Union Revenues, which was due to expire in 2024, the PEC provides for its extension until 2032, allowing the government to make budget execution more flexible within the limit of 20% of all federal taxes linked by law to funds or expenses.

The government's leader in Congress, Senator Randolfe Rodrigues, celebrated the conclusion of the vote on the spending cuts package. According to him, the measures show the government's commitment to fiscal responsibility.

”Today we are delivering to Brazil savings of at least R$ 60 billion (around US$ 10 billion), with no embargoes on future measures. After two very turbulent weeks, due to the instability of the exchange rate, we are concluding a set of measures that were required by the country at this time,“ he said. ”What is most important is that we are delivering on this government's commitment to fiscal responsibility,“ he added.

Earlier Friday, Finance Minister Fernando Haddad said that the savings would amount to just over R$ 70 billion, with a difference of ”around R$1 billion” with the changes made by Congress to the spending cut package. He also mentioned that the government intends to vote next year on the bill that provides for exemption from personal income tax (IRPF) for those earning up to R$ 5,000 (US$ 821.5). If approved, the change will come into effect from 2026.

The bills dealing with the limitation of super-salaries in the civil service and changes to military pensions were also tabled for next year. “The issue of super-salaries has not been abandoned, we're going to vote on it at the beginning of next year. The issue of the military was discussed, but there wasn't time to vote on it,” said Rodrigues, who added that the 2025 Annual Budget Bill should be voted on soon after the parliamentary recess, between Feb. 1 and 20, after the election of the boards of the House and Senate. “We would have liked [the matter] to be voted on later this year, but the rapporteur had the interpretation that there wouldn't be enough time to adapt the changes that were approved in fiscal organization in recent days to next year's budget,” he lamented. Earlier in the day, the rapporteur of the matter, Senator Angelo Coronel, said that his report would be considered “after the parliamentary recess”, as there was still a lack of consolidated information on the matter.