Monday, September 26, 2022

Brazil court-ordered govt payments could hit 2022 budget like a “meteor”, says economy minister By Reuters

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© Reuters. FILE PHOTO: Brazil’s Economy Minister Paulo Guedes speaks during a news conference after a meeting to deliver the tax reform package at the National Congress in Brasilia, Brazil, June 25, 2021. REUTERS/Adriano Machado

By Marcela Ayres and Jamie McGeever

BRASILIA (Reuters) – Brazil’s Economy Minister Paulo Guedes said on Tuesday that the full payment of 90 billion reais ($17 billion) of federal court orders potentially slated for 2022 would hit the government budget like a “meteor”.

In a live event hosted by online media outlet Poder 360, Guedes said the government has already drawn up a draft constitutional amendment to address these potential liabilities, noting that the federal government’s discretionary budget is 96 billion reais.

These payments are court-ordered outlays, often comprising compensation, benefits and tax refunds that the government must make following legal defeats in court.

Guedes said they totaled around 13-16 billion reais a year in the early part of the last decade, before rising to around 40-50 billion reais a year as the current government of President Jair Bolsonaro took power in 2019.

That has suddenly soared to 90 billion reais, Guedes said, adding that he was not sure how that happened.

“Maybe we fell asleep at the wheel,” Guedes said, adding that the government may have “failed” somewhere along the line. But he denied the situation could have been too different because these issues are largely “out of our reach.”

This renewed focus on Brazil’s fiscal challenges weighed heavily on the currency on Tuesday, with the U.S. dollar rising 2% to 5.27 reais.

Guedes also said on Tuesday that the beefed-up nationwide Bolsa Familia welfare program slated to be rolled out after November has been budgeted for and will not threaten the government’s ‘spending cap’ fiscal rule.

But the potential 90 billion reais of court-ordered payments, if enforced, would affect all government spending, he warned.

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