Brazil’s top court unloads Lula with ‘secret budget’, ruling social spending

© Reuters. FILE PHOTO: President-elect Luiz Inacio Lula da Silva of Brazil speaks during a Christmas reunion with trash pickers, in Sao Paulo, Brazil, December 15, 2022. REUTERS / Carla Carniel

SAO PAULO (Reuters) – Brazil’s President-elect Luiz Inacio Lula da Silva won two crucial victories on Monday, after the Supreme Court issued an order allowing him to increase social investment, while placing outlawed a non-transparent congressional spending program.

In a decision late Sunday, Brazilian Supreme Court Justice Gilmar Mendes issued an order removing the 600 reais monthly allowance for poor families from the constitutional spending limit, giving the temporary green light. time for the extension of payment to next year.

Then, in a Monday ruling, the entire court bench ruled that the so-called “Secret Budget” program gives Congress greater control over public resources, is illegal.

Those two decisions are the driving force for Lula, allowing him to fulfill his campaign pledge to increase social spending while also giving him greater bargaining power over congressional leaders by limiting his ability to their efforts to draw concessions through non-transparent measures.

The “Secret Budget” program was used by far-right incumbent Jair Bolsonaro to gain support in Congress. It distributes money to lawmakers passing bill amendments, but has been criticized for its lack of transparency.

Supreme Court Justice Roberto Lewandowski voted to make the measure illegal, defeating the leader of the lower house, Arthur Lira, and President of the Senate Rodrigo Pacheco.

Following the decision, Lira canceled her Monday agenda to meet with Pacheco.

Mendes’ decision, which still needs to be ratified by the entire Supreme Court bench, eases the pressure on a constitutional amendment Lula is seeking to pass to allow him to fulfill his campaign pledge and invest more in the poor of the country.

The central part of the bill is to raise the spending cap to include Lula’s social package. The bill has passed the Senate and is currently awaiting a vote in the lower house.

The Brazilian real weakened early Monday following the Mendes ruling but later covered losses.

Lula’s incoming Finance Minister Fernando Haddad told reporters on Monday that negotiations on the bill would continue, despite the Menders’ decision.

“It’s important for the country that bets on good politics, on negotiations, on institutions and for us, to power economic policy … will ease the mood of the market. and shows that Brazil will be on the right track from January 1,” he said.

Investors say money markets are seeking clarity on the implications of the decision.

“Mendes’ decision has left the market bewildered,” said Fabrizio Velloni, chief economist at Frente Corretora. “The dollar exchange rate is likely to be very volatile today.”

Lula’s bill aims to waive at least 100 billion reais ($19 billion) from the spending cap next year to promote social welfare programs.

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