BRAZIL - DINO SPARKS NEW CRISIS WITH CONGRESS BY BLOCKING PARLIAMENTARY AMENDMENTS, EXPOSING LULA GOVERNMENT AGREEMENT

SUPREME COURT MINISTER FLÁVIO DINO DECIDED TO BLOCK THE REVALIDATION OF R$ 1.9 BILLION IN PARLIAMENTARY AMENDMENTS, REVEALING AN AGREEMENT BETWEEN GOVERNMENT LEADERS AND CONGRESS LEADERSHIP. THE DECISION PUSHED THE PALACE INTO A NEW INSTITUTIONAL CRISIS. BY SUSPENDING THE “JABUTI” INCLUDED IN A FISCAL ADJUSTMENT BILL, THE SUPREME COURT DISMANTLED A POLITICAL STRATEGY OF THE GOVERNMENT, REIGNITING THE CONFLICT BETWEEN JUDICIARY AND LEGISLATURE OVER THE AMENDMENTS AND THE FORMER SECRET BUDGET.

THE BLOCKED CLAUSE WAS PART OF A BILL THAT DEALS WITH LINEAR CUTS TO TAX BENEFITS AND EXPANDS TAXATION ON SPORTS BETTING, FINTECHS, AND PAYMENTS OF CAPITAL INTEREST (JCP), WITH AN EXPECTED REVENUE OF APPROXIMATELY R$ 20 BILLION. SINCE IT DID NOT RELATE DIRECTLY TO THE ORIGINAL BILL CONTENT, THE CLAUSE WAS LABELED A “JABUTI.”

IN PRACTICE, THE BILL ALLOWS THE GOVERNMENT TO MEET FISCAL TARGETS, BUT IT REPRESENTS A TAX INCREASE, A POINT THAT CONGRESS HAD BEEN OPPOSED TO.

BEFORE PRESIDENTIAL SANCTION, DINO HAD ALREADY SUSPENDED, ON SUNDAY (21), THE EFFECTS OF THE CLAUSE APPROVED BY CONGRESS ON WEDNESDAY (17), PREVENTING IT FROM ENTERING INTO FORCE. THE BILL STILL AWAITS PRESIDENT LULA’S DECISION, WITH A DEADLINE UNTIL JANUARY 12, 2026, FOR APPROVAL OR VETO. EVEN IF FULLY SANCTIONED, THE EFFECTS OF THE CLAUSE REGARDING AMENDMENTS WOULD REMAIN SUSPENDED BY THE SUPREME COURT.

THE BILL’S REPORTER IN THE CHAMBER, DEPUTY AGUINALDO RIBEIRO (PP-PB), STATED THAT THE INCLUSION OF THE CLAUSE WAS REQUESTED BY THE GOVERNMENT TO NOT LOSE BUDGET SPACE.

CONGRESS PRESIDENT HUGO MOTTA (REPUBLICANOS-PB) CONTACTED FLÁVIO DINO TO EXPLAIN THE AGREEMENT THAT ENABLED THE BILL’S VOTE. ADVISORS REPORTED THAT THE CLAUSE ON OUTSTANDING PAYMENTS WAS DRAFTED BY THE PRESIDENCY’S CIVIL HOUSE, WITH MINISTERS ASKING FOR INCLUSION OF FUNDS FOR INCOMPLETE PROJECTS AND INITIATIVES ACROSS MORE THAN 10 MINISTRIES.

THE SUSPENDED CLAUSE AUTHORIZED THE REVALIDATION OF UNPROCESSED OUTSTANDING PAYMENTS FROM 2019 ONWARDS, INCLUDING CANCELLED ONES, ALLOWING SETTLEMENT UNTIL THE END OF 2026. IN PRACTICE, IT WOULD ENABLE PAYMENT OF PARLIAMENTARY AMENDMENTS NOT EXECUTED BETWEEN 2019 AND 2023.

THE MEASURE SPECIFICALLY BENEFITS RELATOR AMENDMENTS – THE SO-CALLED SECRET BUDGET – AND COMMITTEE AMENDMENTS, WHICH HAVE BEEN DECLARED UNCONSTITUTIONAL BY THE SUPREME COURT DUE TO LACK OF TRANSPARENCY AND OBJECTIVE DISTRIBUTION CRITERIA.

DINO RESPONDED TO A REQUEST FROM PSOL AND REDE LAWMAKERS, WHO CHALLENGED THE ATTEMPT TO REOPEN FUNDS FOR EXECUTION OF ALREADY VETOED AMENDMENTS.

THE CLAUSE WAS PART OF A BROADER POLITICAL AGREEMENT DURING THE DISCUSSION OF THE DOSIMETRY BILL IN THE SENATE’S CONSTITUTION AND JUSTICE COMMITTEE. GOVERNMENT LEADER JAQUES WAGNER CONFIRMED HAVING MADE AN AGREEMENT WITH THE OPPOSITION WITHOUT CONSULTING THE PRESIDENTIAL PALACE.

SOME GOVERNMENT LAWMAKERS VOTED FOR THE BILL, WHICH REDUCES PENALTIES FOR THOSE CONVICTED OF THE JANUARY 8 EVENTS AND ATTEMPTS TO OVERTHROW THE GOVERNMENT, POTENTIALLY BENEFITING FORMER PRESIDENT JAIR BOLSONARO.

LAWMAKERS, INCLUDING KIM KATAGUIRI (UNIÃO-SP), ACCUSE THE GOVERNMENT OF USING AMENDMENTS AS POLITICAL PRESSURE, REFERRING TO THE SITUATION AS “PANETONE AMENDMENT.”

THE SUPREME COURT’S DECISION REINFORCES THE ONGOING CONFLICT BETWEEN JUDICIARY AND CONGRESS OVER BUDGET CONTROL, WHICH HAS LASTED SINCE LATE 2022. THE COURT HAS LIMITED PAYMENT OF AMENDMENTS TO ENSURE TRANSPARENCY, WHILE LAWMAKERS DEFEND THEIR CONSTITUTIONAL PREROGATIVE.

FOR 2026, AN ELECTION YEAR, MORE THAN R$ 61 BILLION HAS BEEN ALLOCATED FOR PARLIAMENTARY AMENDMENTS, OF WHICH R$ 49.9 BILLION GOES TO INDIVIDUAL, BLOCK, AND COMMITTEE AMENDMENTS, AND R$ 11.1 BILLION IS RESERVED FOR MINISTERIAL EXPENDITURES UNDER EXECUTIVE MANAGEMENT.

CONGRESS PRESIDENT SENATOR DAVI ALCOLUMBRE (UNIÃO-AP) HIGHLIGHTED THE IMPORTANCE OF NOT CRIMINALIZING AMENDMENTS, STATING THAT THEY SOMETIMES FUND PROJECTS THAT WOULD OTHERWISE HAVE NO FINANCIAL SUPPORT AND ARE ESSENTIAL FOR LOCAL NEEDS.