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About the possibility of categorizing the methods of renegotiating the subnational public debt with the Federal State: a comparative analysis of the Fiscal Restructuring and Adjustment Program (PAF) between the States in Brazil and other federal states

Grant number: 22/01177-0
Support Opportunities:Scholarships in Brazil - Scientific Initiation
Effective date (Start): May 01, 2022
Effective date (End): August 31, 2023
Field of knowledge:Applied Social Sciences - Law - Public Law
Principal Investigator:Gabriel Loretto Lochagin
Grantee:Arthur Basso Galli
Host Institution: Faculdade de Direito de Ribeirão Preto (FDRP). Universidade de São Paulo (USP). Ribeirão Preto , SP, Brazil


Analyzing the situation in Brazil during the Coronavirus crisis, there is an intend towards a decrease in public revenues and an increase in expenses, even to face the calamitous situation. Therefore, the increase in spending possibilities can only be achieved with greater availability of resources, on the part of all federated entities. At this point, the question of the indebtedness of States and Municipalities comes as a great variable: either to expand the possibilities of expenses or the needs to limit commitment. Currently, the Federal State is the largest creditor of state and municipal debts, and, as such, it is responsible for defining the methods by which payments are established. This position, also extremely important for the conduct of macroeconomic policy, is the result of a troubled historical process, which was responsible for federalize and accumulate debts, pre-existing and new, through Laws 7,976/89, 8,727/93 and 9,496/97. More than that, it also outlawed the fiscal strategies that States and Municipalities used to relieve themselves of their immediate debts, and imposed global limits on public indebtedness, through LC 101/2000. The method of administration of such debts by the Federal Government is based on debt negotiation and assumption contracts, which are regulated by the fiscal adjustment programs established by the aforementioned laws, and sporadically amended by complementary laws. Considering that such programs, in an innovative way in Brazilian history, started to require consideration from States and Municipalities, they are essentially three: (i) the Fiscal Restructuring and Adjustment Program (PAF), established by Law 9,496/97, substantially amended by LC 148/2014 and LC 156/2016, and their subsequent plans, (ii) the Fiscal Monitoring and Transparency Program and Fiscal Balance Promotion Plan (PEF), both established by LC 178/2021, using as relevant factor o (iii) Fiscal Recovery Regime (RRF), from LC 159/2017. At this point, although contracts were generally made in the 1990s, since then, such agreements have been renewed by several additive terms and revisions to targets and commitments, in addition to federal laws that increasingly facilitated the payment of interest and amortization of the principal by States and Municipalities, see Complementary Laws 148/2014, 156/2016, 159/2017 and 178/2021. Even so, the indebtedness crisis of federated entities, especially after 2010, has taken financial positions increasingly drastic to finances and the public budget. At this point, the following work has as its primary objective to analyze, in general, the normative and political strategies employed by the Federal Government in the renegotiation of debts with the States, regarding to the elaboration and alteration of, and divergences between, inter-federative agreements, elaborated under the aegis of the Fiscal Restructuring and Adjustment Program (PAF), from Law 9,496/1997, and subsequent amendments. Still, the work intends to compare the normative strategies of Brazilian policies with the negotiation practice of other Federal States around the world, in order to identify possible similarities and differences in methodologies. The main focus will be on analyzing the Federated States that are members of the Organization for Economic Cooperation and Development (OECD), due to the relevance that such States have and the significant amount of fiscal and macroeconomic policies on public debt developed. With this, the report will verify the theoretical possibility of categorizing such strategies in different models of renegotiation of the public debt of subnational entities with the Federal Union, using as a categorization criterion the legislative influence and the degree of negotiating autonomy of the representatives of the entities during the moment. of the negotiation, for the final version of the negotiation agreement. (AU)

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