🚀 AI-picked stocks soar in May. PRFT is +55%—in just 16 days! Don’t miss June’s top picks.Unlock full list

Brazil court-ordered govt payments could hit 2022 budget like a "meteor", says economy minister

Published 08/03/2021, 10:10 AM
Updated 08/03/2021, 10:16 AM
© Reuters. FILE PHOTO: Brazil's Economy Minister Paulo Guedes speaks during a news conference after a meeting to deliver the tax reform package at the National Congress in Brasilia, Brazil, June 25, 2021. REUTERS/Adriano Machado

By Marcela Ayres and Jamie McGeever

BRASILIA (Reuters) - Brazil's Economy Minister Paulo Guedes said on Tuesday that the full payment of 90 billion reais ($17 billion) of federal court orders potentially slated for 2022 would hit the government budget like a "meteor".

In a live event hosted by online media outlet Poder 360, Guedes said the government has already drawn up a draft constitutional amendment to address these potential liabilities, noting that the federal government's discretionary budget is 96 billion reais.

These payments are court-ordered outlays, often comprising compensation, benefits and tax refunds that the government must make following legal defeats in court.

Guedes said they totaled around 13-16 billion reais a year in the early part of the last decade, before rising to around 40-50 billion reais a year as the current government of President Jair Bolsonaro took power in 2019.

That has suddenly soared to 90 billion reais, Guedes said, adding that he was not sure how that happened.

"Maybe we fell asleep at the wheel," Guedes said, adding that the government may have "failed" somewhere along the line. But he denied the situation could have been too different because these issues are largely "out of our reach."

This renewed focus on Brazil's fiscal challenges weighed heavily on the currency on Tuesday, with the U.S. dollar rising 2% to 5.27 reais.

© Reuters. FILE PHOTO: Brazil's Economy Minister Paulo Guedes speaks during a news conference after a meeting to deliver the tax reform package at the National Congress in Brasilia, Brazil, June 25, 2021. REUTERS/Adriano Machado

Guedes also said on Tuesday that the beefed-up nationwide Bolsa Familia welfare program slated to be rolled out after November has been budgeted for and will not threaten the government's 'spending cap' fiscal rule.

But the potential 90 billion reais of court-ordered payments, if enforced, would affect all government spending, he warned.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.