Archive for October, 2011
Wednesday, October 19th, 2011
Cristina Kirchner opponents try to avoid re-election
Next Sunday (23), the Argentines go to the polls to elect their new president. If no relevant new fact occur this week, the trend is that Cristina Kirchner win re-election in the first round. The favoritism of Kirchnerism over her opponents is so great that it can not be ruled out the possibility of the government to resume its majority in Congress.
As the favorable scenario Cristina is consolidating every day, the government tries to prevent rumors that could jeopardize Kirchnerism the third consecutive victory.
For example, last week, the president’s chief of staff, Anibal Fernandez, denied that the current government has an interest in a constitutional reform that would enable Cristina for a third term in 2015.
Remember that a few days ago, the candidate Elisa Carrio of the Civic Coalition, said the presidential candidate, Hermes Binner also placed second in the polls, would make an agreement with the government in reforming the constitution so that Cristina Kirchner is again a candidate.
In the coming days, the trend is that rumors will show up more often. However, the possibility of them to prevent the re-election of Cristina Kirchner is quite remote. Because of this, the evaluation of Arko Advice, is that the current president is the favorite to win re-election, something that might happen on Sunday, in the first round.
Wednesday, October 19th, 2011
The Revenue Report determines the beginning of voting for the 2012 budget proposal. The proposal, signed by Sen. Acir Gurgactz (PDT/Ro) with the aid of the Revenue Committee, was delivered to the Mixed Budget Committee (CMO) on October 11. It’s voting was scheduled for Wednesday, October 19.
Based on examination of the economic situation, this report seeks to provide the recent evolution of tax collection and behavioral hypotheses for macroeconomic variables, and assess revenue estimates and methodology contained in the 2012 Budget.
It’s worthwhile highlighting that, under the terms of the 2012 Budget Guidelines Law, the Ministry of Planning, Budget and Management must send the eventual update of the economic parameters for 2011 and its projections used to prepare the 2012 Budget Law Bill (PLOA 2012) to the Mixed Budget Committee by November 21. This data may require new revenues assessment for more or for less.
The new forecasts for 2012
The Revenue Report uses various macroeconomic projections for the next year and incorporates, in its revenue projection, the new tax collection numbers published in September, in the Federal Government’s fourth two monthly assessment.
For the large macroeconomic variables, in 2012 the Report forecasts that both GDP growth and the Selic rate (average) will be lower than the PLOA forecasts. On the other hand, the exchange rate and inflation will be higher.
This combination, as indicated in the report, will enable that the drop in revenue, determined by lower GDP growth in real terms, to be compensated by a scenario of greater inflation, as shown by the small variation projected for nominal GDP in 2012.
Furthermore, the Report foresees that inflation for 2012, as measured by IPCA, will reach 6%. This is a very high figure, which goes against monetary authority expectations that there will be a convergence to the center of the target next year.
However, the greatest differentials used by the Report are with regards to the revenue calculation base. Revenue achieved in 2011 has been superior to governmental estimates every month. And, only now in September, when the report pertaining to August was published, did the government recognize that its forecasts for the year were under estimated. Therefore, this perception was not part of the picture that guided the preparation of the budget proposal by the government, which took the accumulated amounts from January to June as a base.
In order to construct a new calculation base, the report is purged of nontypical income that occurred in 2011; it incorporates the effect of already approved legislative changes for various taxes (IPI on cigarettes and beverages), taxation impacts of the new projections on the exchange rate and applies this set of variables to 2011 tax collection, which was recognizably greater.
Another aspect raised by the Report is the difficulty of incorporating the effect of company and employment formalization on the various revenues. This is a phenomenon that has already been happening for various years and was not afforded appropriate treatment up to now. A significant portion of the errors that culminated in tax collection underestimates may have originated from this projection imperfection.
As the fruit of this exercise, the Report concludes that the revenues projected by the government for 2012 are underestimated and proposes a correction.
Wednesday, October 19th, 2011
As expected, countries that export cars to Brazil have filed a representation against the new IPI taxation policy on imported cars.
However, two issues intrigue those that understand international trade.
The first is that Japan, the first country to file, chose a committee with little political importance in the WTO. The read seems to indicate that Japan filed just to go through the motions and/or to create a little time in order to arrive at an agreement with Brazil.
The second intriguing aspect is China’s silence in relation to Brazil’s movements. Despite maintaining a significant deficit in its bilateral trade with Brazil, China acts as if it were the favored party.
Wednesday, October 19th, 2011
It is not only the Allied base that has demonstrated its dissatisfaction with some of Pres. Rousseff’s attitudes, especially when compared to those adopted by former Pres. Lula.
Amongst allies, the greatest complaint is with regards to the alleged lack of dialogue between the Planalto Palace and National Congress. Some leaders complain that decisions are not being negotiated but simply communicated to the Legislative Branch.
Dissatisfaction also exists in the relationship between the Rousseff administration and labor unions, which are an important social support base for PT administrations.
Union members have criticized the discounting of days on strike (a practice rarely used during the Lula era) and the government’s firmness in the negotiations, targeted at putting a stop to new stoppages. Following the banking and post office strikes, there is the risk of a police strike, Judiciary Branch civil servants and oil workers.
What can also explain the government’s tougher position in relation to the issue, is the current economic situation. The Planalto can Palace claims that the scenario is not favorable for hikes.
In the eyes of some governmental sectors, the slower growth rhythm and the fear that uncertainties at the international level might contaminate domestic economy, justify a more severe posture.
Wednesday, October 19th, 2011
The mixed committee seeking a consensus surrounding oil royalties distribution among states and municipalities will meet again – probably on Tuesday (October 18) – to gather more suggestions before the presentation of Sen. Vital do Rêgo’s (PMDB-PB) final text.
The reporting representative is preparing a substitute text to PLS 448/11, authored by Sen. Wellington Dias (PT-PI), which should encompass the ideas of various members of Parliament. The objective is to vote it on Wednesday (October 19). The text is based on the premise that everyone should concede some of the resources at the beginning, based on the following revenue forecast for 2012: R$ 28 billion in royalties and special participation in exploitation at sea; and R$ 1.2 billion from oil originating inland.
The Union would get approximately R$ 8.5 billion; producer states, R$ 12 billion; and remaining states, or the States Participation Fund (FPE), R$ 8 billion. The total amount would be transformed into shares and, would gradually be adjusted to that already foreseen in the bill sent to Congress by former Pres. Lula.
Once approved by the Senate, the bill will follow on to be analyzed by the House. As such, the Congressional session scheduled for October 26 by Senate chairman José Sarney (PMDB-AP) to analyze former Pres. Lula’s veto of the Ibsen Amendment (which divides oil royalties equally between states and municipalities), should yet again be postponed.
It’s important to highlight that the Senate proposal is not consensual, despite banking on the support of the majority. Thus being, the risk of being questioned judicially by producer states and municipalities still exists and is considered high.
Wednesday, October 19th, 2011
PSDB, DEM and PPS, the main opposition parties to the Dilma Rousseff administration, continue unable to construct an alternative agenda to that of the current administration. Furthermore, two internal divergences continue to exist.
Within the PSDB, for example, the statement given by Sen. Aécio Neves (MG), “ready to run against any candidate from the PT camp, whether Lula or Rousseff” for the 2014 presidential succession, caused negative reactions amongst the Toucans.
A few days following Neves’ manifestation, former governor of São Paulo José Serra (PSDB) stated on twitter that “putting the cart in front of the horses only complicates things and disorganizes the opposition”.
Serra’s comment was interpreted as a reaction to Aécio Neves’ movements, which, over the last few weeks, twice demonstrated his willingness to be the PSDB candidate in 2014. Firstly, in a Toucan bench meeting in the House; then, in an interview given to the O Estado de S. Paulo newspaper on October 9.
As we can see, the dispute between Aécio Neves’ and José Serra’s groups continues to be the order of the day within the Toucan nest. However, contrary to the last few years, the correlation of forces within the PSDB is currently favorable towards Neves in light of the fact that the senator from Minas Gerais banks on the support of important leaders, amongst which former president Fernando Henrique Cardoso (FHC) and São Paulo Governor Geraldo Alckmin.
Furthermore, in the party’s program that went on air on Thursday (October 13), inasmuch as Serra’s participation is concerned, space given to Neves was much greater than that afforded the former governor.
More than that, even though tardy, the party is resuming its defense of the FHC inheritance. Distanced from the last PSDB presidential campaigns, FHC appeared in the program several times mentioning his legacy. More than once, he stated that the positive changes that have taken place in Brazil over the last few years started in his administration.
It’s worthwhile remembering that the defense of the FHC administration was one of Aécio Neves’ campaign banners. José Serra, on the other hand, who was the PSDB presidential candidate in two of the last three of the party’s defeats to the PT, always sought to distance himself from the FHC era, a fact that made it easier for Lula and then for Rousseff to label negatively.
Within the DEM (PSDB’s main ally since 1994) the atmosphere is also not good. After having lost important leaders to the PSD and having shrunk even further, especially in the House, the party may rethink its partnership with the Toucans.
In interview given to Folha de S.Paulo journalist Josias de Souza’s blog, the DEM national vice president, José Carlos Aleluia, stated that the “PSDB has not been providing us with the treatment we expected” and that the DEM “is not a PSDB captive ally”. With regards to 2014, he stated that there is no “automatic alignment” thesis with the Toucans.
According to Aleluia, already in the 2012 municipal elections, DEM should disassociate itself from the PSDB in important electoral centers, such as the cities of São Paulo, Rio de Janeiro and Belo Horizonte. In São Paulo, in light of José Serra turning down the possibility of being a candidate for Mayor, the DEM will tend to support Gabriel Chalita (PMDB). In Rio de Janeiro, they should have their own candidature with Rodrigo Maia, with Clarissa Garotinho (PR) as vice. As to Belo Horizonte, where the PSDB and PT will support the reelection of Márcio Lacerda (PSB), the DEM is talking about bulding a new path.
According to Aleluia, for now the only agreement between the PSDB and DEM involves the race for the Aracaju (SE) City Hall, where Toucan José Carlos Machado should be the candidate for vice Mayor on DEM’s João Alves ticket.
The internal dispute within the PSDB has also led the PPS to rethink its course. The party’s national president, Roberto Freire, is preparing a document in which the possibility of their own presidential candidate for 2014 will be discussed.
The constant disputes within the PSDB are creating an additional problem for the party: how to avoid having allies like the DEM and PPS distance themselves from the party.
It’s worth highlighting that, within the current scenario it is highly unlikely that the DEM and PPS will have the strength to support their own opposition candidature in 2014, being that the alliance with the PSDB is the most probable path. However, the DEM and PPS may increase their requirements in order to continue being associated with the Toucans.
Wednesday, October 19th, 2011
Various proposals on Social Security issues are currently being processed in Congress. Some of these imply changes to the Constitution; however, being that there is no atmosphere or space within the current national situation for these changes, they have less chances of being approved. Those that are situated within the sphere of ordinary and complementary law have greater chances of approval.
In the first group, the more outstanding propositions are those of greater budgetary impact: Constitutional amendment proposition # 555, which abolishes inactive civil servant contribution; and # 270, which reestablishes parity and integrality of disability pensions. Both are waiting to be included in the order of the day, but the government has the House chairman’s guarantee that they will not be scheduled for voting.
The second group includes various bills, both for civil servants and for private initiative, and almost all have real chances of being approved. Of the first, included amongst those that stand out is the one that provides for special retirement regulation and the one that institutes complementary Social Security, both authored by the Executive Branch and have chances of being approved this year. For the private sector, the outstanding issue is the Social Security factor, which is waiting for House voting.
Civil servant and Social Security
The civil servant complementary Social Security bill, for which the government has just requested the constitutional urgency regime, should be conclusively approved in the House by the end of November, and in the Senate before the end of year recess, scheduled to begin on December 23.
The text, which is valid for future civil servants, proposes the creation of a public civil servant pension fund, limiting welfare coverage to the cap practiced by the INSS: R$ 3,689.66.
The offered benefit plan is exclusively of defined contribution, in which there is no solidarity or responsibility on behalf of the sponsor (the government) in the case of bankruptcy or poor fund administration. In other words, the risk is entirely that of the participant. Its complementation depends on the plan’s managerial competence and, mainly, on the result of financial investments.
Civil servants that enter public service following the creation of the fund will be subject to obligatory affiliation to the regime up to the INSS cap. Should he or she desire retirement complementation, they must adhere to the pension fund, towards which the government, as sponsor, can contribute up to 7.5% of the portion of the civil servant’s remuneration that supersedes the Social Security cap.
Civil servants that enter public service before the creation of the fund will not be subject to the new rules, but can adhere to the fund by renouncing the right to parity and integrality of their retirement pension. If they opt for complementary Social Security, they will contribute to their own regime up to the INSS cap and, above that, with 7.5% to complementary Social Security.
The benefits will be made up of three parts: a) one pertaining to the new benefit cap, equal to INSS; b) another, pertaining to what is accumulated in the pension fund; and c) a third, a special deferred benefit pertaining to the period in which the civil servant contributed through the totality of his or her remuneration, before migrating to the pension fund.
Current civil servants can only migrate to the new system via written manifestation, in other words, through their own free and spontaneous desire. On the other hand, future civil servants, upon entering public service, will only have obligatory coverage in their own regime up to the INSS cap, to which they will contribute with 11% up to the amount of R$ 3,689.66. If they have sufficient income, they can opt for complementary Social Security, contributing with 7.5%, and the government with an identical counterpart.
End of the Social Security factor far from agreement
The bill of law that abolishes the Social Security factor, already approved in the Senate, is highly unlikely to be approved under the proposed terms. Especially because, like Pres. Lula vetoed a similar amendment to a bill that provided for the minimum wage, President Dilma Rousseff will veto this one.
Labor unions lost the opportunity to make the factor flexible, as proposed by Rep. Pepe Vargas (PT-RS), with which the government was in agreement. The proposal allowed workers entering the work market earlier, to opt for the 85 formula for women and 95 for men, a formula in which ages are added to time of service.
This formula, which has already been enacted for civil servants and is included in the transition rule, allows the excess time of contribution, above 30 years for women and 35 for men, to be compensated by the minimum age required for entitlement to retirement pension, 55 and 60 years respectively. In other words, workers that achieve the formula but are less than 60 years of age would be free of the factor, which greatly reduces the retirement pension. However, the government no longer agrees with this alternative.
Wednesday, October 19th, 2011
Dear all,
after a long period absent from publishing, I return today. Hope all the readers who participated in the past, keep doing so from now on.
all the best,
Thiago de Aragao
RSS feeds
Podcasts
