Brazil Candidate for Speaker Vows to Protect Spending Rule

(Bloomberg) -- The candidate backed by President Jair Bolsonaro in the race for the lower house speakership pledged to protect Brazil's spending cap rule, seen by investors as an anchor to the nation's fiscal austerity drive.

Arthur Lira would, if elected, secure a constitutional amendment with mechanisms to cut expenses if needed to comply with the spending ceiling, he said in an interview Monday. The proposal, known as emergency bill, was set to be voted late last year before being put on hold by the government amid pushback from lawmakers. He would also push to create a new social program within the constitutional limit for public expenditures.

“The emergency bill will set the tone for 2021. It will give the government more control over the public budget,” Lira said in an interview.

Lira, a centrist lawmaker and businessman, also listed an administrative reform to reduce the cost of the public sector as a priority ahead of a planned tax overhaul to simplify Brazil's byzantine and costly levy system. Facing the public sector lobby would increase investors' confidence, he said.

Brazil's fiscal concerns have been front and center ahead of elections for the new heads of the house and the senate, which will take place in early February. At stake is the power to effectively control the legislative agenda, including Bolsonaro's ambitious economic plans, by deciding which bills go to a vote and when.

Brazil's house has more power than the senate, and its speaker is the second in the president's succession line. While Lira is supported by Bolsonaro, the other front-runner, Luiz Felipe Baleia Tenuto Rossi, has the backing of outgoing speaker Rodrigo Maia.

Bolsonaro on Monday blamed Maia for the freeze on reforms and accused him of being too cozy with the opposition. “We can't have two more years with the left running the voting,” Bolsonaro said in a reference to the length of the speakership term.

Spending Pressure

The next heads of congress will face pressure to increase public spending as Brazil, one of the counties hit hardest by the coronavirus pandemic, faces a sluggish economic recovery. As emergency cash payments to informal workers end, officials are weighing new measures to assist the poorest.

Lira stressed that any social program must comply with the spending cap established by the constitution.

“Brazil will have to cut expenses in the flesh to find budget space for more social spending,” he said, adding that the economy will recover only after mass vaccination. “Brazil's economy is an elephant that was lying down and got up. We can't run the risk of the elephant lying down again because this would bring serious consequences.”

Central Bank

A long-time critic of attempts to increase the power of the central bank, Lira said he wouldn't impose his view on the house floor regarding a bill to grant formal autonomy to the monetary authority. The proposal, much-awaited by investors, has already passed a senate vote.

Brazil Politics: Maia Toughens Tone on Bolsonaro Amid House Race

The campaign for the the house speakership is heating up, with both leading candidates traveling around the country to gather support. Lira says he is confident a majority of lawmakers want a more predictable and collegial leadership -- a criticism of outgoing speaker Maia, who Lira says concentrated too much power.

While publicly backed by Bolsonaro, Lira vowed to never be an extension of the presidential palace.

“There must be harmony among all three powers and all themes will be broadly debated,” Lira said. “I'm the candidate of a group of lawmakers, not Bolsonaro's candidate.”