Pacheco retaliates and hinders Haddad’s plans after impasse over Minas debt

The search for a solution to the States’ debts with the Union turned into an offensive between the government of President Luiz Inácio Lula da Silva (PT) and the president of the National Congress and the Senate, Rodrigo Pacheco (PSD-MG). The biggest obstacle is the actions of the Minister of Finance, Fernando Haddad, who has been trying to circumvent the Minas Gerais state. Pacheco, however, does not hide that he is unhappy with the move.

The president of Congress has retaliated against the corner attempt. In recent days, he signed decisions that hamper the Lula administration’s plans in Congress. One of them was to start the debate on limiting the Emergency Events Sector Resumption Program (Perse). The decision displeased parliamentarians, who tended to reverse the repeal. This while the government announced that it was working on a specific text on the topic.

Pacheco’s intention is to show that, even with this attempt to take on the burden of the situations, he has in his hands the power to advance on agendas considered fundamental for the Lula government, especially in the economic field, since basically everything needs the approval of the Congress. And, if there is no two-way game, there is no willingness to collaborate.

The divergences do not end on the issue of debt, which takes the debate with an electoral tone in Minas Gerais. There are also impasses in this relationship regarding payroll tax relief for sectors of the economy, in addition to municipalities, an issue that was a struggle. “The problem with politics is that the date arrives”, they say in the political corridors, a phrase that Pacheco agrees with. The Minas Gerais native understands that he does not have to “hold the fire” from Lula, who did not finalize a text of agreement so that city halls would not be reburdened from this Tuesday (2).

The president of the Senate is also not happy with the government’s stance, which appears in the voice of the government leader in the House, senator Jaques Wagner (PT-BA), of freeing the bench to vote as it wishes on dozens of projects under analysis. The assessment is that this action weakens the discussions, while the Executive accommodates itself without incisively guiding its base.

Understand the chronology of the impasses between Pacheco and the Lula government:

November 2023: Pacheco made the first move to be the “father” of solving state debts. At the time, he opened negotiations with Lula and Haddad and destabilized the governor of Minas Gerais, Romeu Zema (Novo), who had no dialogue with the federal government.

In the same month, the text was delivered to the President of the Republic with points such as the federalization of state-owned companies and the transfer of credits from the Mariana agreement and the Kandir Law to the Union.

December 2023: Pacheco received Haddad at the Official Senate Residence, in Brasília (DF). He informed that he would ask the Federal Supreme Court (STF) for Minas Gerais to be released from paying the debt installments until March 31st. The deadline was also indicated as reasonable for the government’s economic team to analyze the Congress president’s proposal and present an opinion.

The conversation generated expectations among other governors who see their States sinking into liabilities with the Union. According to data from the National Treasury, the accumulated debt balance of all States reaches the figure of R$740 billion. Of this total amount, only four (São Paulo, Rio de Janeiro, Rio Grande do Sul and Minas Gerais) represent R$660 billion, which is equivalent to 90% of the debt stock.

March 26/2024: At the end of the deadline signaled by the Ministry of Finance, Haddad brought together governors from the South and Southeast and presented a plan, but frustrated expectations. The minister conditioned the reduction of interest on States’ debts to the Union on investment in technical secondary education (EMT). From Pacheco’s proposal, only extraordinary amortization with assets was considered, but in a limited way.

The plan presented by Haddad generated surprise and even some indignation among governors, who expected to hear about the reformulation of the Fiscal Recovery Regime (RFF), created in 2017 to minimize debts, but with unpopular demands. On the same day, they went to Pacheco after meeting with Haddad and declared their support for the federalization of state-owned companies, defended by the president of Congress, but with debates on the debt index.

The corner to Pacheco in Haddad’s proposal, after the Minas Gerais player had been in charge of this articulation for months, was not viewed favorably. Before this movement, the miner was appointed as the author of the government’s project in Congress. After, announced that it will maintain its proposal when assessing that the government’s plan does not address the core of the problem, which is the debt stock.

March 27/2024: Pacheco gave a clear message of his dissatisfaction to the government. He ordered the installation of the special commission to discuss the Provisional Measure (MP) signed by Lula which, dehydrated on the issue of reimbursement, it basically deals with Perse. The obstacle is that, less than a month before, Haddad agreed with party leaders that the program would be redone through a consensus text, in addition to being analyzed via bill.

The decision came as a surprise to the Finance Minister. On the same day, Pacheco met with Haddad and the minister of the Institutional Relations Secretariat, Alexandre Padilha, who participated in the creation of the proposal on education.

March 28/2024: It was then that Haddad and Padilha decided to try to calm the crisis. They called on media outlets, especially from states affected by the debt problem, to resume credit to Pacheco. They stated that the plan also will contemplate the possibility of federalization of state-owned companies as a reduction of part of the liabilities. In relation to Minas Gerais, for example, Copasa, Cemig and Codemig would fall into this scope.

The statement was not enough to alleviate governors’ irritation on the matter. They remain lost in the Lula government’s proposal and complain, for example, about trips to Brasília for an event that is not what they expected. In the end, this feeling gives strength to Pacheco, who will try to gather support for his proposal.

April 1/2024: The last act of the president of Congress was this Monday (1st). He blocked the changes made by the government in tax relief on municipal payrolls and continued the debate on other points in the MP, such as Perse, for another 60 days. This issue became a struggle, with Congress granting the tax incentive and the government withdrawing it. In the end, city halls could lose the incentive starting this Tuesday (2) if the Lula government’s proposed repayment were maintained.

Also this Tuesday, Haddad said he was not communicated directly by Pacheco about the miner’s decision. The behind-the-scenes understanding, however, is that the government knew the deadline and it was not up to Pacheco to assume the role of warning or demanding a solution. The movement also led the minister to make a new appeal for all Powers of the Republic, including the National Congress and the Legislature, to collaborate on a pact for fiscal targets.

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