Brazil: Lula Vetoes Law Intended as Social Shock

Recently, President Luiz Inácio Lula da Silva vetoed a set of measures approved by the Congress aimed at speeding up the war on poverty throughout the country, entitled “Social Shock for the Protection of Low Income Citizens”, included in the Statute of Budgetary Policies (LDO””Lei de Diretrizes Orçamentárias).

The program, containing government spending guidelines for 2005, intended to end young and adult illiteracy””which affects some 16 million Brazilians today””by the end 2007 and pick up the pace of several social programs, such as Family-Scholarship (a program that compensates low income parents financially for keeping their children in school), micro-loans, and communal drugstores.

The article also called for the execution of sanitation projects employing, “at least”, 500,000 workers.

“The measures are in direct conflict with the autonomy of Powers,” claimed Lula in a message directed to Congress. Nonetheless, the text indicates that the measures “are of extreme relevance” and viewed as priorities of this administration.

The “Social Shock” program had already been proposed by former Minister and Senator Cristovam Buarque from the Workers Party. By means of an addition slipped in while in Congress””but sanctioned by the President””the minimum monthly salary will vary according to the per capita GNP (Gross National Product) rate in 2005. Thus, its value should go up to from 260 reais (US$ 87) to 280.59 reais (US$ 93).

Overall, President Lula signed 18 vetoes to the law approved by the Congress. They impact proposals that would allocate more public funds for the health sector and a larger slice of the pie of fuel tax (Cide)””40%””for investments in transportation infrastructure, such as roads, ports, and railways.

The vetoes were announced a few hours before the legal deadline. An extra edition of the “Diário Oficial da União” (Union Official Register) kept the print shop running.

Transparency

The text in the Statute of Budgetary Policies (LDO) that was sanctioned will make the next Union Budget less transparent than senators and house representatives intended. One of the articles vetoed by Lula established “unlimited access” for congressmen to budget, financial, or accounting information.

In an explanatory note for the veto, recommended in unison by the Treasury and Planning Ministry and the Central Bank, the President argues the article could jeopardize the nation’s security.

The disclosure of information “can unnecessarily disturb the nation’s political and economic environment,” states the message to Congress.

Likewise, under recommendation by the economic team, Lula vetoed the measure that made it mandatory to submit to Congress a monetary policy cost estimate report, highlighting, above all, interest expenses. “It’s not possible to evaluate unequivocally, a priori, such costs.”

On the transparency issue, Lula also denied the demand for the administration to breakdown in detail the budgetary cuts by programs in each ministry.

The cuts are fixed by presidential decree and in a general fashion for each ministry.

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