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Brazil: Constitutional Amendment Limits Public Spending

(Dec. 16, 2016) On December 13, 2016, the Brazilian Federal Senate approved an amendment to the Constitution that imposes a ceiling on public spending for the next 20 years.  (Proposta de Emenda à Constituição No. 55 de 2016 — PEC do Teto dos Gastos Públicos, Federal Senate website (Dec. 13, 2016).)  The constitutional amendment will now be forwarded to President Michel Temer for his signature.  (Saiba o que Muda com a Aprovação Final da PEC do Teto dos Gastos Públicos, AGÊNCIA BRASIL (Dec. 13, 2016).)

The objective of the amendment is to limit the growth of government expenses; it was proposed by the federal government for the purpose of overcoming the country’s economic and financial crisis.  (Id.)  The amendment establishes that the government can only spend the same amount that was spent in the previous year, corrected only for inflation.  The measure limits for 20 years all federal expenses of a given year to the budget of the previous year, as corrected by an official index (IPCA).  (Id.)  The rule is applicable to the executive, legislative and judicial branches of government (including the Federal Senate, Chamber of Deputies, Federal Audit Tribunal, Federal Public Prosecutor’s Office and its Council, Public Defender’s Office, Federal Supreme Court, Superior Tribunal of Justice, National Council of Justice, and labor, federal, military, and electoral courts).  (Id.)

Complementary legislation to change the method of correcting the imposed limits can only be proposed by the President of the Republic in the tenth year of its implementation and allows only one change by presidential mandate. (Id.)

Any branch of the federal government or its agencies that fails to limit the growth of expenses will be prevented in the following year from adjusting salaries, hiring staff, conducting public tenders (except for vacancy replacement), or creating new expenses until their expenses return to the limit established by the amendment.  (Id.)