On his second visit to supervise the situation of the floods that devastated Rio Grande do Sul, President Lula met this Sunday (5) with the governor of Rio Grande do Sul Eduardo Leite (PSDB), accompanied by the presidents of the Senate, Rodrigo Pacheco (PSD) , and from the Chamber of Deputies, Arthur Lira (PP), in addition to some ministers, such as Fernando Haddad, from Finance. Leite called for a reconstruction plan for the state and for a relaxation of the rules that limit increases in spending from one year to the next, without which he is prevented from applying the extra resources he may receive. As a bonus, he left a message for Lula.
Here is the part of Leite’s speech that is interesting: “Rio Grande do Sul is already a state that has difficulty operating normally due to fiscal restrictions. The problem we have with debts incurred over time here in the state already makes it difficult for us to act in times of normality. In times of exceptionality we will not be able to respond, we will not have the breath to respond if we do not forward certain solutions that are already known to everyone in advance due to financial constraints, a state budget already under pressure with debts, with stocks of previous problems, deficits, anyway. In the fiscal rules, as I said, if you put 10 billion [de reais] In our account, I can only spend last year’s limit plus inflation for the period. I can’t make the expense, I will have restrictions, they will require exceptionalities. We will have to work on this logic.”
The government that saves in normal, lean times has resources to invest in difficult, famine times. It goes for Rio Grande do Sul, it goes for Brazil.
Taking care not to personalize the message too much, out of respect for Lula’s presence — on whom, after all, he depends to obtain emergency resources for the state —, Leite demonstrated the price that a ruler and, consequently, the population pay when there is a lack of control. in public spending in times of normality. The problem may not break out in the hands of those who throw themselves into spending, but at some point it appears, with harmful effects including on the ability to deal with emergency situations, as are, in fact, the increasingly frequent floods in Rio. Grande do Sul.
Amid the current tragedy caused by the rains, the government of Rio Grande do Sul has been accused of not taking climate risks seriously and of not having adopted the necessary measures to mitigate floods like those that occurred on at least four occasions in recent months. Leite, who has never denied climate change (contrary to what some left-wing parliamentarians have stated), demonstrated that there is a limit to what a public manager is capable of doing. This limit is the budget. If you have a state that is in debt or that systematically spends more than it earns, at the time of emergency or the need for huge investments in infrastructure to adapt to a new climate reality, solutions end up delayed or occur incompletely.
Rio Grande do Sul’s financial situation is difficult largely because of the spending spirit of PT governors who commanded the state in the past. This was the veiled message that Leite gave to Lula: “…debts incurred over time here in the state…”. This “over time” includes the PT governments.
Rio Grande do Sul’s debt has been deepening for many decades, since before the government of Leonel Brizola, in the early 1960s. But Rio Grande do Sul’s debt began to get out of control even during the period of the military dictatorship, when the states were stimulated by Brasília to seek external loans to finance the “economic miracle”.
Throughout the 80s and 90s, the situation became unsustainable. At the end of the 90s, under Antônio Britto’s government, an attempt was made to reach an agreement with the Union, which assumed the debt. Rio Grande do Sul committed to paying almost 9 billion reais in installments as far as the eye can see, but did not meet the counterpart of privatizing its state bank. Even so, the deal was closed.
But then the government of PT member Olívio Dutra took over and the agreement began to fall apart. The new governor went to court against the agreement. Furthermore, the index that was used to correct debt soared. Just when a new governor, Germano Rigotto, arrived, the state faced droughts that impacted agriculture. Revenue collapsed.
In 2006, economist Yeda Crusius, from the PSDB, was elected and began adjusting the state’s accounts by implementing the idea of zero deficit. At the time, this was considered almost revolutionary. Imagine, trying to spend less than you earn. At first it worked, and Rio Grande do Sul even recorded a surplus in some years.
But a new PT government, this time under Tarso Genro, took over the Piratini Palace. Genro ended the zero deficit policy and increased public spending, promoting, for example, salary adjustments for civil servants. Since then, governments in Rio Grande do Sul have struggled to resolve the state’s accounts and overcome the debt problem.
When he took office for the first time, in 2020, one of Eduardo Leite’s first measures was to resume negotiations with the National Treasury. He is doing a good job balancing the public accounts, which presented a primary result of 2.4 billion last year. But, after decades of disastrous management, the state still has a monstrous debt to the Union, in the order of 90 billion reais.
Rio Grande do Sul needs support from the federal government to recover from the flood tragedy. Partisan differences need to be set aside. Lula, if he acts well, with solidarity with the people of Rio Grande do Sul and making an effort to remove bureaucratic and fiscal obstacles so that investments can be made in the state, he will have the chance to show that he is capable of governing for all Brazilians. He will not be helping Leite, who is trying to become one of his opponents in the 2026 presidential election, but the gauchos who lost almost everything, including their means of subsistence, in the floods.
The governor, being careful not to mention his PT predecessors, also tried to avoid partisanship. The message is technical: the government that saves in normal, lean times has resources to invest in difficult, famine times. It goes for Rio Grande do Sul, it goes for Brazil.
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