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Bolsonaro eyes change to Brazil spending cap after election – Metro US

Bolsonaro eyes change to Brazil spending cap after election

FILE PHOTO: Ceremony to hire the first doctors of the
FILE PHOTO: Ceremony to hire the first doctors of the “Medicos pelo Brasil” Program in Brasilia

By Bernardo Caram and Ricardo Brito

BRASILIA (Reuters) -Brazilian President Jair Bolsonaro said on Friday he would look at changing government spending rules after October’s election in order to make room for more infrastructure investments, raising alarms among economic policymakers.

Three Economy Ministry officials, who requested anonymity to discuss internal deliberations, said the ministry had not received any order to study a change to the constitutional spending cap and they would resist loosening fiscal rules.

Bolsonaro is trailing in opinion polls behind leftist former President Luiz Inacio Lula da Silva, who has called repeatedly to scrap the spending cap. Analysts warn that the right-wing incumbent may turn to increasingly populist economic proposals to make up ground in the highly polarized race.

Bolsonaro ran in 2018 promising orthodox economic policy and big-ticket privatizations, but has failed to deliver on most of those plans and relied increasingly on energy subsidies and welfare spending to prop up his popularity.

“Last year we had about 300 billion reais ($61.3 billion) in excess revenue, but you can’t spend a penny of that on infrastructure because of the spending cap,” Bolsonaro said during a radio interview.

“A lot of people say this is something that needs to be changed. We will leave it for the future, we will discuss this issue after the election,” he added.

The spending cap was approved by Brazil’s Congress in 2016, amending the constitution to limit the growth of the federal budget to the pace of inflation.

The rule is considered the principal anchor of fiscal policy, although the Bolsonaro government has created exceptions to make room for more public expenditures this year.

The Economy Ministry has also proposed new ways to finance public spending, including a proposal last month to create a fund from the sale of public assets to pay for anti-poverty programs and public investments.

($1 = 4.8967 reais)

(Reporting by Ricardo Brito; Writing by Gabriel Araujo and Marcela Ayres; Editing by Brad Haynes, Paul Simao and Rosalba O’Brien)

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