August 9, 2021

BRASILIA (Reuters) -Brazilian President Jair Bolsonaro sent Congress on Monday a proposal for a constitutional amendment to help handle the payment of the government’s court-ordered debts through a fund financed by the privatization of state companies.

Bolsonaro earlier visited Congress to hand in a bill to restructure Brazil’s welfare program, which would also be partly financed by the same fund, the government said.

Officials said the largest debts would be parceled over time to avoid a dramatic impact on the budget deficit.

Last week, Economy Minister Paulo Guedes said court-ordered judiciary payments in 2022 could total 90 billion reais ($17 billion), a figure that could hit next year’s budget like a “meteor.”

The payments are outlays the government must make – often comprising compensation, benefits and tax refunds – following legal defeats in court. They have surged dramatically from 40-50 billion reais a year when Bolsonaro took power in 2019.

The fiscal impact of mounting government legal debts has worried investors and weakened the real against the dollar in recent days.

A constitutional amendment is needed as the payment of legal debts is ordained in the constitution.

Bolsonaro said the new monthly welfare payments will increase by at least 50%, raising the minimum handout to 300 reais ($57) from the current 190 reais.

The program called Bolsa Familia that grants monthly benefits to millions of Brazil’s poorest families was started by former leftist president Luiz Inacio Lula da Silva, but Bolsonaro is changing that name to Auxilio Brasil.

Citizenship Minister Joao Roma, whose portfolio includes social security programs, said payments will start in November in a new program expanded to cover 16 million people from 14.6 million at present.

He said the government had initially estimated that the restructured welfare program would cost 18 billion reais. But he said the program will not exceed the country’s constitutionally mandated spending ceiling.

“We want to increase the average payment, but we have to act with fiscal responsibility to avoid an imbalance in government finances,” he said at a news conference.

($1 = 5.23 reais)

(Reporting by Marcela Ayres; writing by Carolina Mandl and Anthony Boadle; editing by Richard Pullin)

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