Brazil House Readies Virus Budget as Bolsonaro Response Lags

Samy Adghirni and Martha Beck

(Bloomberg) -- Brazil’s Congress is fast tracking its response to the coronavirus pandemic that has so far drawn a slow and often erratic reaction from President Jair Bolsonaro.

The lower house Friday night approved a proposal known as the “war budget” that bypasses fiscal responsibility laws to finance anti-virus measures. The constitutional amendment had, which had overwhelming cross-party support in two separate votes. Lawmakers cast their votes remotely rather than attending the session in-person due to coronavirus concerns.

The bill still needs to win approval in two rounds of balloting in the Senate before it becomes law.

“The bill shows Congress’ sense of responsibility,” lower house Speaker Rodrigo Maia said in an interview ahead of the vote.

The proposal, which was drafted by lawmakers and negotiated with Bolsonaro’s economic team, reflects a growing sense of urgency over the outbreak that has killed more people in Brazil than anywhere else in Latin America. Bolsonaro has been criticized for describing it as a “little flu” and downplaying social distancing recommendations from his own health minister. At the same time, his government has been slow to come up with a comprehensive plan to support workers and companies affected by the crisis.

Read More: ‘Little Flu’ Can’t Hurt Him: Why Bolsonaro Still Shuns Lockdowns

The constitutional amendment seeks to establish a crisis committee comprising the president and members of his cabinet, as well as legislators and representatives from states. While the group is to be headed by Bolsonaro, it empowers lawmakers who would be able to review all the decisions it makes.

“The lower house saw an opportunity to act as the federal government struggled to orchestrate a broad response,” said Creomar de Souza, chief executive of Dharma Political Risk and Strategy in Brazil. “The lower house is in charge; In this case, the executive branch is merely reacting.”

The proposal would also grant the central bank new powers including the ability to purchase corporate debt. That would align Brazil’s monetary authority with peers including Colombia’s central bank and the U.S. Federal Reserve.

Golden Rule

More broadly, the “war budget” will shift the government away from its pledges to rein in public debt and bolster fiscal accounts. It would temporarily suspend the so-called golden rule, a constitutional clause that prevents the government from taking on debt to pay for current spending.

Read More: Stronger Budget Result in 2019 Masks Brazil’s Harsh Debt Reality

Policy makers had already abandoned their 2020 fiscal target last month when Bolsonaro declared a public calamity, which allows him to spend outside the federal budget. The Economy Ministry said this week that the primary deficit, which excludes the cost of servicing debt, will balloon to 419 billion reais ($79 billion) this year, from a previous target of a 124 billion reais gap. Measures announced by the government so far include a three-month stipend for informal workers and assistance for companies struggling to retain employees.

(Updates with approval by the lower house)

For more articles like this, please visit us at bloomberg.com

Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.