On November 5, President Jair Bolsonaro handed Senate president Davi Alcolumbre (Democratas – allied to the ruling party), a package of economic measures to “reform the Brazilian State”. The bills, which have not yet formally entered Congress, focus on constitutional norms for the allocation of resources to federal governments, states and municipalities, as well as on rules concerning public accounts.  

The new measures involve three proposed amendments to the Constitution that would entail changes to Brazil’s federal pact, a set of rules determining how states and municipalities can collect resources and raise revenue. The objective of these bills is to ensure that states and municipalities receive a greater share of funds from oil revenues and the Fundeb (Fund for the Maintenance and Development of Basic Education).

The proposals also contemplate the creation of the Fiscal Council of the Republic, a kind of working group involving representatives from the private sector, National Congress, the Judiciary and the States, with the possible participation of the President himself. The idea, explained the Minister of Economy, is for the Council to analyze the allocation of public funds and compliance with fiscal rules at a quarterly meeting.

The package, prepared by Bolsonaro’s economic team, aims to both balance the books and decentralize resources, granting states and municipalities a larger budget and more autonomy to pursue investments. In Bolsonaro’s own words, “it is they who in the states and municipalities are better equipped than us to decide what they should invest in, because they are the ones living with problems every day.”

It is important to note that while these measures are economic, they are not part of the Government’s tax reform initiative.