Presidential candidate Ronaldo Caiado of the PSD promised on Sunday (20) to cut 100% of Brazil's mandatory congressional earmarks and cap the growth of public spending, as part of a plan he says would open the way for lower interest rates. He made the pledge during a campaign walk on Avenida Paulista in São Paulo. His running mate, Gilberto Kassab, joined the event, according to news site G1.
The core of the plan is a constitutional amendment, known in Brazil as a PEC, that would run for 24 months and limit growth in government spending to at most half the growth rate of GDP. Caiado said the measures could take the country's benchmark interest rate to "probably 7%" and inflation to a range between 3.5% and 4%, which he argued would make Brazilian producers more competitive. "The cause [of the high interest rate] is an irresponsible government that spends more than it can," he said.
Where Caiado says he would cut
Asked where he would make the cuts, the candidate listed four fronts.
"With that authorization, I have already prioritized the cuts I will make: 100% of mandatory parliamentary earmarks. A review of all tax incentives granted in Brazil. An audit, through artificial intelligence platforms, of all the money being distributed by government programs, to see whether they are serving their purpose. A 25% cut across all branches of government and independent agencies."
Caiado said he considers the Central Bank's independence correct. In his reading, the monetary authority sets rates in reaction to government spending. "The Central Bank simply regulates interest rates according to government spending. It is the consequence, not the cause. If the government spends irresponsibly, the Central Bank raises [rates] so that inflation does not run wild," he said, according to news outlet A Redação.
Up to Congress
Mandatory earmarks, called emendas impositivas in Portuguese, are funds that lawmakers direct into the federal budget and that the executive branch is required to release. Ending them, like passing the spending cap, depends on Congress, where the earmarks are a legislative prerogative. A constitutional amendment needs 308 of 513 votes in the Chamber of Deputies and 49 of 81 in the Senate, in two rounds in each house. According to A Redação, Caiado said the adjustment would spare workers, retirees and beneficiaries of social programs.
On the same walk, the candidate said criminal factions should be classified as terrorist organizations and that he would send that change to Congress if elected. He criticized the PT government and said the party was "complicit with criminal factions," according to G1. The fiscal pledge lands in the final stretch of the campaign, with the first round of the presidential election scheduled for October, and its first test in a potential Caiado administration would be congressional approval of the package.