This Thursday, the National Congress overturned part of President Lula’s veto over the program of full repayment of state debts (Propag), and re-established the mechanisms that expand the negotiating margin for state contracts with the Union.
The states’ victory saw the direct participation of Rio Governor Claudio Castro (PL-RJ), who traveled to Brasilia to follow the vote and has participated in the talks since the beginning of the week. It has been circulating in Congress since Tuesday, and this morning it participated in the crucial meeting that concluded the political agreement on the issue.
The agreement was reached at a meeting at the official headquarters of the Senate, in the presence of Davi Alcombre, Zee Guimarães, Carlos Zaratini, Randolph Rodriguez, Flavio Bolsonaro, and Castro himself. The meeting was also attended by MP Zee Victor (PL-MG) – Parliament’s Rapporteur on Environmental Licensing, as part of the negotiations on defining environmental veto procedures, in parallel with the Propag discussion.
Castro met with Union Prosecutor Jorge Messias on Wednesday with the aim of ensuring that the consensus was not judicialised.
Tax refund system
For example, President Lula vetoed a rule allowing states to maintain the benefits of the fiscal recovery system – which Rio de Janeiro includes, for example – even within the propagation system. This was overturned.
A veto of a provision that allowed states to use money from the New Fund for Regional Development (FNDR), created with the tax reform, to lower interest rates was also overturned.
Congress also overturned its veto on provisions allowing the Union to deduct from the amounts of premiums due on State debt contracts amounts corresponding to resources transferred by Federal entities to carry out work subject to Federal responsibility in the years 2021 to 2023. This measure constitutes, in practice, a waiver of revenues, because it reduces the assets of the Union (appropriations due from the States) without the formal counterpart of a previously registered obligation.
According to the parliamentarians who participated in the meeting, Castro persistently defended the abolition of the veto that limited the fiscal transfer of the states. He also spoke separately with Centrao leaders and members of the base and the opposition, in an agenda that included meetings with Randolph Rodriguez (PT-AP) and Flavio Bolsonaro (PL-RJ).
The governor’s message was repeated throughout the morning: Without these intercepted devices, states in financial crisis, like Rio de Janeiro, would lose the ability to predict compliance with the program.
Despite defeat on these six points, the government was able to maintain its other veto, while maintaining standing criteria for accession to PROPAG, program governance, performance indicators, and financial oversight provisions.