On Monday (4), the Chamber of Deputies approved, in the first round, the new basic text of the proposed amendment to the Constitution (PEC) that creates the “war budget”, intended exclusively for actions to combat the coronavirus pandemic.

The Mayor, Rodrigo Maia

Photo: Maryanna Oliveira / Chamber of Deputies / DIvulgation / Estadão Content

The proposal had already been approved by the Chamber, but had to be analyzed again by the deputies because the Senate changed the wording.

The voting of the base text, remotely, was cut in two. First, the deputies approved the excerpts maintained by the Senate (481 votes to 4 against). Then they voted on the amendments made by the rapporteur in the Chamber, Hugo Motta (Republicanos-PB).

The PEC vote, however, is not yet complete. Deputies need to vote on the highlights (proposed changes to the text) to complete the analysis in the first round.

As it is an amendment to the Constitution, the text will still be submitted to the second round of voting. The objective of the parliamentarians is to conclude the entire voting this Monday. To approve it, at least 308 votes (three-fifths of the Chamber) are required.

The purpose of PEC is to separate from the general budget of the Union the emergency expenses used to face the disease, without the requirements applied to the regular budget, such as the “golden rule”. By this mechanism, provided for in the Constitution, the government cannot incur debts to pay current expenses, such as salaries. However, in the war budget, this rule will not apply.

The parallel budget will take effect during the state of public calamity, approved by Congress and which is valid until December 31.

Central Bank Bazooka

The proposal authorizes the Central Bank, during the state of public calamity, to buy and sell public securities in the local and international secondary markets, and private shares of companies, only on the spot.

The possibility created by the proposal will allow, according to the BC, the injection of resources in companies that face financial difficulties during the coronavirus crisis since the institution will be able to buy securities from companies and lend these assets to them without having to go through the banking system. The BC can still negotiate public bonds, issued by the National Treasury.

BC President Roberto Campos Neto estimated that the institution could buy up to R $ 972 billion in shares from private companies. Under the proposal, the shares of micro, small and medium-sized companies will have priority in the purchase by the agency.

Among the amendments made by deputies to the text approved by the Senate is the withdrawal of an article that established that companies could only benefit from financial or tax credits if there was a commitment to keep jobs. There was also the deletion of a section that defined which securities of private companies could be traded by the BC.

According to the proposal’s rapporteur, Hugo Motta (Republicanos-PB), the BC did not object to the text, as it will only commercialize titles already expressed in the Senate text.

In addition, the rapporteur argues that the change will not be considered merit, that is, there would be no need for the text to return to the senators’ analysis, delaying the promulgation.

The text, however, maintains some restrictions for the trading of private securities, such as the classification “BB- or higher” and trading on the domestic market.

These purchase limitations were included by the rapporteur after critics of the original PEC text argued that there was a loophole for the BC to buy “bad credits”, which are long-overdue debts that are difficult to recover. Any losses from the BC with these operations would be assumed with public money.

The Central Bank will need to publish daily information on the operations carried out. The terms of the deal, such as, for example, buyer and fees, should be made publicly available within 24 hours. Every 30 days, the BC president will have to report the operations to Congress.

Financial institutions that sell assets to the BC will be prohibited from using resources in the distribution of profits and dividends. In addition, with these resources, they are prevented from increasing the remuneration of directors and administrators. Shares may be sold by the Central Bank after the calamity is in effect, if this is advantageous “from the point of view of the public interest”.

Next steps

If deputies keep the Senate text, the PEC will go to promulgation. If there are changes, the text goes back to the Senate. However, as it is an amendment to the Constitution, the enactment may be sliced, that is, include the points approved by the two Houses, leaving the differences for later analysis.

When the PEC comes into force, the government will be able to adopt simplified procurement processes, hiring of personnel, execution of works and services, “that ensure, when possible, competition and equal conditions for all competitors”.

The PEC also gives the National Congress the power to suspend any decision by the Executive “in the event of irregularity or exceeding the limits” of the proposal.

See too:

‘I can’t abandon them’: the 98-year-old doctor who continues to visit patients despite the coronavirus