Brazil Lula's fiscal framework should no longer be defined in Constitution, says aide

BRASILIA, Dec 6 (Reuters) -

There is consensus around Brazil's President-elect Luiz Inacio Lula da Silva that the country's new fiscal framework should no longer be defined in the Constitution, an economic adviser said on Tuesday.

Nelson Barbosa, a member of his transition team, said at an event hosted by newspapers Valor Economico and O Globo that the Constitution should indicate that a law would establish these fiscal guidelines, showing support for a proposal in Congress providing for such a change.

Senator Alexandre Silveira, the leading sponsor of a constitutional amendment that opens room for increased expenses promised by Lula in his campaign, proposed that the leftist leader would be required to present a

new fiscal framework

in a conventional bill by the end of next year.

This type of change currently requires a constitutional amendment instead of a conventional bill, making its approval more difficult by depending on the support of three-fifths of the legislators in the Senate and Lower House.

Barbosa, a former finance and planning minister, stated that the transition team is analyzing different proposals for the fiscal framework to replace the spending cap, which limits the expansion of public expenditures to the previous year's inflation.

According to Barbosa, the principle of the inflation targeting system, which has bands to accommodate shocks, should be used in Lula's fiscal policy. The framework should also be compatible with job creation and economic growth, he added.

Barbosa also said that most economists recommended to Lula the return of federal taxation on fossil fuels, but the timing for that is undefined.

Outgoing President Jair Bolsonaro sent a 2023 budget proposal to Congress with extended tax reduction measures on fuels of 52.9 billion reais ($10 billion) that would initially expire this year. ($1 = 5.2288 reais)
Reporting by Marcela Ayres Editing by Marguerita Choy

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