Anti-Haddad, Estadão opposes lower debt for São Paulo.
A day after deeming the mayor's urban mobility policy "electioneering," the newspaper uses the same adjective to refer to the renegotiation of state and municipal debts; the publication states that the agreement on a formula between the federal government and Congress to alleviate debts at a time when the Workers' Party member needs money is "far from a mere coincidence."
247 - The newspaper O Estado de S.Paulo has been showing itself to be anti-Haddad on a daily basis. One day after to call it "electioneering" The newspaper uses the same adjective to describe the public transportation policy announced by the mayor of São Paulo, describing the agreement made between the federal government and Congress to alleviate the debts of states and municipalities. According to the Mesquita family's publication, it's no coincidence that the debt relief formula was agreed upon at a time when the Workers' Party member needs resources. The question is: which mayor doesn't "urgently" need funds? Read the full editorial below:
Electoral renegotiation
It is far from a mere coincidence that the federal government has agreed with Congress on a formula to alleviate the debt of states and municipalities at a time when the mayor of São Paulo, Fernando Haddad, urgently needs financial resources. Only with more money will Haddad, who is from the same party as President Dilma Rousseff, be able to show any achievements next year – when, it is worth remembering, there will be elections for president and governors.
The relief from payments on state debts negotiated by the federal government in 1997 and on municipal debts negotiated from 2001 onwards had been demanded for a long time by governors and mayors. But, under the agreed conditions, the biggest beneficiary will be Haddad.
The change in the index used to calculate debts negotiated by the Federal Government with states and municipalities – from the General Price Index – Internal Availability (IGP-DI), from the Getúlio Vargas Foundation, to the National Consumer Price Index (IPCA), from the IBGE – was proposed by the government at the end of last year, through a supplementary bill that also contained changes aimed at ending the fiscal war between the states.
As Finance Minister Guido Mantega justified when proposing to President Dilma Rousseff the submission of the supplementary bill to Congress, the financial criteria established in the debt renegotiation contracts of states and municipalities, with the correction by the IGP-DI (General Price Index - Domestic Supply), "reflected macroeconomic conditions completely different from those that prevail for the Brazilian economy today."
Due to pressure from governors, mayors, and parliamentarians, the government also agreed to change the method of calculating the outstanding balance, from the signing of the contract until January 1, 2013, which will imply granting a discount.
In some cases, such as that of the São Paulo City Hall, the discount will be in the billions. Calculated using the criteria currently in force, the outstanding debt is around R$ 54 billion; under the agreed rules, it will fall to approximately R$ 30 billion.
This will occur because the accumulated variation of the IGP-DI, plus the normal charges and additional debt charges incurred by the City Hall between 1999 and 2012, reached more than 800%. Meanwhile, the Selic rate (which will become the ceiling for the new charge if the proposal is approved and enacted) had an accumulated variation of 493%.
The São Paulo City Hall will also have another substantial gain. Because it failed to amortize R$ 3 billion of its debt in 2002, when the Workers' Party (PT) governed the city (and Fernando Haddad was part of then-mayor Marta Suplicy's team), the São Paulo City Hall lost the right to pay lower real interest rates of 6% and began paying real interest rates of 9% per year, which increased its annual expenses and caused the outstanding debt to grow more rapidly. The change currently being processed in Congress also reduces the value of the installments that the City Hall will have to pay, which opens up financial space for more spending starting January 1, 2014.
For now, all of this is on paper. The Finance and Taxation Committee approved the changes agreed upon the previous day in the early hours of Wednesday (October 9th). The bill still needs to be reviewed by the Constitution, Justice and Citizenship Committee before being submitted to the Chamber's plenary session. After that, it will have to go through the Senate.
It remains to be seen how these changes can be made without violating the Fiscal Responsibility Law (LRF). In effect since 2000, the LRF has been and continues to be essential in ensuring more responsible management of taxpayer money.
Article 35 of the law clearly establishes that credit operations between one entity of the Federation and another are prohibited, "even in the form of novation, refinancing, or postponement of previously contracted debt." What is the change of index, which modifies the calculation of the outstanding balance and installments, if not a refinancing?
Changing this provision of the Fiscal Responsibility Law would mean removing one of its essential elements. It would be a gigantic institutional setback, one that the Nation would not forgive.