By Marcela Ayres and Bernardo Caram
BRASILIA, April 19 (Reuters) - Brazil's plan to achieve
primary surpluses from 2025 onwards is not specified in new
fiscal rules before Congress, making the annual targets subject
to the standard budgeting process, Economic Policy Secretary
Guilherme Mello said on Wednesday.
Mello, in an interview with Reuters, stressed that the
government's "flight plan" to improve its fiscal accounts is
clear, and that failure to meet the suggested primary targets
laid out last month could result in higher interest rates.
Mello defended the new fiscal framework, which combines a
more lenient spending cap and primary budget targets with
flexible bands, noting that it would no longer allow
capitalization of state banks to exceed expenditure controls.
While the government previously indicated a goal of zeroing
its primary deficit in 2024 and achieving surpluses of 0.5% and
1% of GDP in 2025 and 2026, respectively, the fiscal framework
sent to Congress on Tuesday leaves the formal primary target to
be defined in each year's budget bill.
Mello acknowledged that the previously announced targets
could "in theory" be modified, but insisted that the government
has a coherent and feasible fiscal plan for achieving them in
the third term of leftist President Luiz Inacio Lula da Silva.
"Ultimately, what determines the fiscal target is the budget
bill for each year," Mello said, after presenting the 2024
budget bill to Congress last week, which includes the target for
zero primary deficit next year.
Finance Minister Fernando Haddad is pursuing a range of tax
measures to restore the country's revenue base and ensure the
viability of the new fiscal framework.
However, most of those proposals have not been formalized
and one of them - eliminating a tax exemption for international
shipments of up to $50 in order to clamp down on international
e-commerce sites - was discarded after widespread complaints.
"If society decides through its representatives that no, I
don't want to recover this revenue, the trajectory to recover
the primary (surpluses) will be longer and interest rates will
be higher."
Regarding exceptions proposed for a new spending cap, Mello
said the government had strengthened limits on the most
significant item: the capitalization of state-owned companies.
Under the new rule, public banks can no longer receive
contributions that would exceed the new public spending limit.
Between 2008 and 2015, while Lula's Workers Party (PT) was
in power, the Brazilian Treasury transferred more than 500
billion reais ($99 billion) to state development bank BNDES,
weakening public finances and squeezing commercial lenders out
of capital markets.
($1 = 5.0490 reais)
(Reporting by Marcela Ayres and Bernardo Caram; editing by
Diane Craft)
