Deputies approved the initiative on Tuesday night by 372 votes in favor and 108 against, opening the way for the government to increase public spending on social programs.
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This is the first legislative victory of the Lula government, although the Chamber still has to vote on the amendments to the project, which must then receive approval from the Senate.
“It was an impressive score,” said Finance Minister, Fernando Haddad, during a press conference this Wednesday.
“The Chamber demonstrated that it seeks an understanding to help Brazil recover more significant growth rates,” he added.
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The markets received the news with less optimism: the São Paulo stock exchange opened lower and was trading down 0,92% at 16:40 pm Brasília, although analysts also attributed the performance to the impact of external factors.
The new fiscal rule puts an end to the spending ceiling, created in 2016 under Michel Temer's government, which only authorizes spending adjustments to keep up with inflation.
The new regime conditions the increase in expenses to the increase in public revenue and limits the increase in spending to 70% of the real growth in revenue in the previous year.
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The government claims that greater spending will allow it to meet urgent social demands and strengthen the country's economic growth, which advanced 2,9% in 2022, although it fell 0,2% in the fourth quarter.
Lula returned to the Presidency in January, promehaving restored popular social programs launched in his first term (2003-2006), many of which were cut during the governments of Temer (2016-2018) and Jair Bolsonaro (2019-2022).
But the economic outlook in the country is much less favorable than that of 77-year-old Lula's first two terms, when Chinese demand for Latin American commodity exports drove dizzying growth.
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Lula has tried to reassure the markets, saying that he will not allow a surge in public spending, and promehaving to balance fiscal, social and environmental responsibility.
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