1. Jon Blondal Deputy Head Budgeting and Management Santiago, 28 January 2004 Budgeting in Brazil

2. Background Distinctive features Annual budget cycle Agenda

3. Real plan End of “Inflation tax” Debt restructuring for the States High and volatile debt profile Fiscal Responsibility Law Background

4. High degree of rigidity Central planning function Lack of rolling medium-term expenditure framework Distinctive Features

5. Constitutional expenditures –Salaries and pensions for civil servants Earmarking of tax revenue –Insurance against high inflation –Non-earmarked taxes must be shared “Mandatory expenditures” –Not subject to presidential decrees High degree of rigidity -over 90% of the budget-

6. Results-oriented budgeting Highlights political priorities –Designation of “mandatory expenditures” Marketing device for public/private partnerships Central planning function

7. Not in place in Brazil Medium-term expenditure frameworks

8. Budget Guidance Law Annual Budget Presidential Budget Implementation Decrees Annual Budget Cycle

9. Aggregate fiscal targets –Primary balance Designation / updates of “mandatory” expenditures Housekeeping issues Budget Guidance Law

10. Extreme top-down model –Letters of totals; 3 weeks to finalise –Appeals process No budget submission –Professionalism varies greatly –High degree of rigidity Role of Congress –Economic assumptions Annual Budget

11. Motivations –Commitment to fiscal discipline –“Correction” of actions by Congress –General tendency for in-year adjustments Drastic effects on small part of budget Presidential Budget Implementation Decrees

12. System has been very effective in terms of aggregate budget control Allocative and operational efficiency could be improved significantly. Conclusion

13. OECD Journal on Budgeting www.oecd.org/gov/budget Conclusion