Imagine setting your budget today for every year through 2036. This week, the world’s ninth-largest economy made just such a decision.
The Brazilian Senate on Tuesday approved a constitutional amendment to freeze social spending by the Brazilian government for 20 years — allowing it to rise only in tandem with inflation. The government says such a dramatic measure is necessary to get the country’s recession-bound economy back on track and gain control over public debt, which has grown sharply in recent years.
With tough fiscal measures such as the amendment, “everyone will be able to project the numbers,” Finance Minister Henrique Meirelles said in an interview in June with the Financial Times. “A lot of the uncertainty is coming down.”
Critics call the amendment draconian.
Many countries around the world, from Greece to Singapore, have adopted strict austerity measures and fixed budgets for short periods, but it’s hard to think of another nation that has imposed such a long freeze. Philip Alston, the U.N. special rapporteur on extreme poverty and human rights, told a Brazilian newspaper this week that if the amendment is passed, “an entire future generation is condemned.” It was approved 53 to 16.
The amendment, called PEC 55, caps public spending on health care, education and social security, which had been priorities of the Workers Party that governed for the past 13 years. It limits government social spending to current levels adjusted for inflation over the next two decades, with a presidential revision available after 10 years. The country’s inflation rate currently hovers around 8 percent.
Last week, Alston sounded the alarm about the amendment’s potential impact, calling the proposal “a radical measure, lacking in all nuance and compassion.” In a statement, he warned: “It is completely inappropriate to freeze only social expenditure and to tie the hands of all future governments for another two decades. If this amendment is adopted it will place Brazil in a socially retrogressive category all of its own.”
The amendment is a major victory for President Michel Temer, who took office in August after the impeachment of his predecessor, Dilma Rousseff, on charges of budget irregularities. In addition to the severe recession, Brazil has suffered from political turmoil, as scores of politicians and prominent business executives have been targeted by judicial investigations into corruption.
The severity of the spending cap, particularly its potential impact on the country’s education and health systems, has drawn repeated protests in Brazil.
Scholars including Leticia Marteleto, an associate professor of sociology at the University of Texas who studies the Brazilian education system, fear that the spending cap will widen the gulf in Brazil’s educational system, harming the poorest students.
Brazilian congressman Marcos Rogério could not disagree more. The lawmaker from the Democratic Party, which is part of the center-right governing coalition, noted that the measure establishes a floor for social spending, preventing future governments from making deep cuts.
“Education doesn’t lose with this amendment, it wins,” he said. He argued that the protests are a result of the government’s lack of communication about the amendment.
Gustavo Azenha, director of the Lemann Center for Brazilian Studies at Columbia University, said the amendment appears to be an effort by the new administration to prove to international investors that Brazil is making a long-term commitment to balancing its budget. But the 20-year period could also limit the ability of future leftist governments to change policies.
Alston, the U.N. special rapporteur, expressed doubts about the government’s goals. “In the long-term,” he said in his statement, “there is no empirical evidence to suggest that these measures will achieve the objectives suggested by the government.”