PL 108-7: Survey on Brazilian Fiscal

UNCLAS BRASILIA 001413

SIPDIS

STATE FOR EB/IFD/OIA, WHA/BSC, AND WHA/EPSC

E.O. 12958: N/A
TAGS: EFIN EAID ECON BR
SUBJECT: PL 108-7: Survey on Brazilian Fiscal
Transparency and Accountability

Ref. State 100283


1. Reftel requests post's response to a survey on fiscal
transparency and accountability in order to provide a
report required by PL 108-7. Below is response for Brazil,
keyed to questionnaire in paragraph 7 of reftel.

a. 3. The government publishes a budget with minimum
delay.

b. Yes, the combined fiscal position of subnational
governments is published. The Central Bank publishes
monthly data on the combined surpluses/deficits of sub-
federal governments with a three-week lag based on changes
in public sector debt balances. More detailed information,
based on cash flow reports by states and municipalities, is
harder to obtain and has a much longer lag.

c. The budget is published in the official gazette and is
available on the internet. The government provides
detailed summaries of the budget and budget amendments to
the media.

d. 3. The federal government has an excellent system of
budget reporting, and is assisting subnational governments
improve their budget reporting systems. Actual budget
expenditures typically are less than budgeted by congress.

e. Basic budget procedures are established in the 1988
Constitution. The 2000 Fiscal Responsibility Law
establishes stringent budget guidelines and reporting
requirements. The 2000 Fiscal Crime Law establishes
criminal penalties for public officials that fail to comply
with specific budget requirements.

f. 3. There are detailed laws/regulations establishing
fiscal transparency.

g. 3. The Fiscal Responsibility Law and Fiscal Crime Law
entered into force in 2000. Public officials are
notionally subject to criminal penalties if they fail to
comply with the law. The vast majority of public officials
appear to take the Fiscal Responsibility Law seriously,
although the criminal penalties of the Fiscal Crime Law
have yet to be invoked.

h. 3. Distribution of tax powers and expenditure
responsibilities is clear and supported by open and stable
intergovernmental transfer mechanisms.

i. Yes, there are independent auditing bodies at the
federal and state level, although the commissioners are
appointed by the executive.

j. 3. Publicly owned entities are under clear control of
the central government budget process. A possible weak
point is lending by government-owned banks, but the banks
are subject to same regulatory requirements as private
banks, and subsidized lending is supposed to be covered by
transfers from the government.

k. 3. Privatization processes are fully transparent and
comprehensively reported.

l. 3. Budget revenue and expenditure estimates are very
reliable, although a recent increase in inflation has added
a small degree of uncertainty to revenue forecasts.

m. Since 1998 the Government of Brazil has been committed
to fiscal discipline and transparency, first under the
Cardoso administration and now under the Lula
administration. The Fiscal Responsibility Law, passed in
2000, also imposes stringent requirements on state and
municipal governments, most of whom take these
responsibilities seriously. Fiscal responsibility at the
subnational level is reinforced by debt rescheduling
agreements that most states and many municipalities have
with the federal government. These agreements establish
certain budget requirements and give the federal government
the right to withhold transfers to states and
municipalities that are in arrears on debt payments.

n. The U.S. government does not have any programs in
Brazil that promote accurate disclosure of revenues and
expenditures. The IMF and World Bank have worked with the
federal and subfederal governments on improving fiscal
management.

Hrinak