Brazil’s Supreme Court declares the “secret budget” unconstitutional

Brazil’s Supreme Court has ruled that a parliamentary plan dubbed a “secret budget,” which has been criticized for giving money to lawmakers with little oversight in exchange for government support, is unconstitutional.

Judges in the country’s highest court voted 6-5 against the mechanism by which parliamentarians were given grants for projects in their constituencies.

Transparency activists have said the opaque practice accounted for about a quarter of Brazil’s discretionary federal budget, often benefiting allies of outgoing President Jair Bolsonaro. They argued that it had trampled on principles of democratic accountability, with limited disclosures about how the funds were spent.

The development was welcomed by supporters of President-elect Luiz Inácio Lula da Silva, who accused Bolsonaro of using the secret budget to boost his failed re-election campaign.

By removing a negotiating tool lawmakers held over the executive branch, the decision will weaken Speaker of the Lower House of Congress Arthur Lira, analysts say.

Bolsonaro relied on lira for a governing majority in a fragmented parliament, while secret budget funds – for local education, health care and infrastructure – helped lawmakers woo voters at election time.

With his inauguration on January 1, Lula also benefited from another ruling by a Supreme Court judge on Sunday night. It noted that its campaign pledge of additional welfare spending may be outside of a tax ceiling that limits public spending growth.

“To regain control of the budget and guarantee it Bolsa Família [benefits programme] are not subject to the spending cap. . . are important assets for the elected government,” said Rebeca Lucena, political analyst at BMJ Consultores.

Lula, a former two-term president, has sought Lira’s support for a constitutional amendment to bypass the spending cap and free up an additional R$145 billion ($27 billion) for next year’s budget. It should be approved this week.

Lucas de Aragão, partner at policy consultancy Arko Advice, said the new government is now less dependent on that route. “Right now there is a clear tension between Lira and the elected government,” he said. “[But] they are not willing to burn bridges. They are looking for common ground – and it could be a vote for the constitutional amendment with a reduced amount of BRL 80 billion.”

Both Supreme Court decisions will only fuel opposition allegations of judicial hyperbole and activism. Bolsonaro supporters have accused top judges of bias in favor of Lula, who first ruled in 2003-10.

The veteran leftist was jailed on corruption charges in 2018, but his convictions were overturned by the Supreme Court last year, paving the way for a presidential bid.

Parliamentarians have long received government money for public works projects, but critics of the secret budget have argued it was on a different scale. The mechanism, formally known as Rapporteur’s Amendments, was introduced in 2020 after Bolsonaro’s inauguration the previous year.

The secret budget should reach 19.4 billion reals in 2023, according to estimates by the non-governmental organization Open Accounts.

Gil Castello Branco, Open Accounts Secretary-General said this is equivalent to six times Brazil’s environmental budget. “This gives a dimension to how these changes were absolutely exorbitant and distorted public policy,” he added.

Lira has previously rejected the term “secret,” saying the facility is “democratic,” which will end the executive branch’s exchange of favors for parliamentary votes.

Additional reporting by Emily Costa

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