BUDGET LAWS

As prescribed by articles 165 - 169 of the Brazilian Constitution, the Budgetary laws come in a three step process.
every four years, a Pluriannual Plan is approved. "The law which institutes the pluriannual plan shall establish, on a regional basis, the directives, objectives and targets of the federal public administration for the capital expenditures and other expenses resulting therefrom and for those regarding continuous programmes." (article 165, paragraph I). Each plan is valid for four years, covering the second, third and fourth years of a Presidential term and the first year of the successor´s term.
The Pluriannual Plan for the period 2004 - 2007 is being discussed by the Congress. Click here to check out how it is doing.
every year, a Budgetary Directives Law is approved. "The law of budgetary directives shall comprise the targets and priorities of the federal public administration, including the capital expenditures for the subsequent fiscal year, shall guide the drawing up of the annual budget law, shall make provisions for alterations in tax legislation and shall establish the investment policy for the official development financing agencies." (article 165, paragraph 2). This law must obey to the Pluriannual Plan, and establish directives for the Annual Budgetary Law. In Portuguese, this law is referred to as LDO - Lei de Diretrizes Orcamentarias.
The LDO 2003, which set parameters for the Annual Budget 2004 (113 articles), can be found here: Law nr. 10,707 / 2003 - Budgetary Directive Law 2003.
every year, a Budgetary Law is approved. As per article 165, paragraph 5:
"The annual budget law shall include:
I - the fiscal budget regarding the Powers of the Union, their funds, bodies and entities of the direct and indirect administration, including foundations instituted and maintained by the Government;
II - the investment budget of companies in which the Union directly or indirectly holds the majority of the voting capital;
III - the social welfare budget, comprising all direct and indirect administration entities or bodies connected with social security, as well as funds and foundations instituted and maintained by the Government"
This law is referred to as "O Orcamento", or The Budget.
In 2004, for the first time the Budget have an online version, hosted by the website of the National Gazette (www.in.gov.br); the 3,446 pages were divided in 6 volumes, in PDF format. Click to access the Brazilian Federal Budget of 2004.

The Executive has the initiative of all three Budget laws (article 84, clause XXIII of the Constitution). The Ministry of Planning is in charge of hearing all the bodies of the Brazilian government (including Legislative and Judiciary branches), analysing the forecasts of all revenues and expenditures, consolidating all the information and preparing a draft budget. The draft is examined and amended by the President, who sends the bill to the appreciation of National Congress.
In elaborating the drafts, besides following Constitutional determinations, two laws must be particularly observed: Law nr 4320 , March 17th 1964, which "institutes general norms of financial law for elaboration and control of budgets and balances of Union, States, Municipalities and Federal District", and the Fiscal Responsibility Law, which instituted norms of good practices with public finances.

In Congress, all budgetary laws are subject to amendments by Deputies and Senators. The amendments must comply with some restrictions: the Directives Law is bound by the Pluriannual Plan, and the Annual Budget is bound by the Directives Law; article 167 of Constitution expressly forbids amendments of certain natures; article 166, paragraph 3, determines that amendments may only be approved if "they specify the necessary funds, allowing only those resulting from the annulment of expenses, and excluding those which apply to: allocations for personnel and their charges; debt servicing; constitutional tax transfers to the states, the municipalities and the Federal District."
So, because personnel, debts and transfers constitute a large part of the Brazilian budget, there is little flexibility for Deputies and Senators to propose amendments.
The majoritiy of amendments propose benefits to the electoral basis of Deputies and Senators; things like a new school or hospital, opening or paving of roads, etc. For the many Representatives who are not known for their ideologic positions, amendments are the best way to gain popularity among their electors.

The proposed amendments are appreciated by a Committee of Deputies and Senators (article 166), which is sub-divided, by topics, in several sub-committees.
The budget committee (the largest of all committees in Congress) is composed of 63 Deputies and 21 Senators; the political parties appoint members of the committee, in proportion to the number of chairs they have in Congress.
Amendments can be proposed on individual basis, by State or region and by Parties. There are limits both for the number and for the amount of the amendments proposed. Resolution n. 02/95 established limits of twenty individual amendments and R$ 2 million.
There are literally thousands of amendments every year. Approval or disapproval is up to the Budget Committee. Because of this discretion power, positions at this committee are among the most sought after in Congress.

After discussion, the Budgets are voted by Congress and sent to promulgation by the President (who can exercize the right to vetoes); budgets are treated as any other ordinary laws.


BUDGETARY EXECUTION

Brazilian budgets are authorizative, not mandatory.
If the law assigns R$ 1,000 to an item of the budget, all it means is that no more than R$ 1,000 may be spent on such item; it does not mean that the R$ 1,000 will be spent; it does not mean that even R$ 1 will be spent.
The process by which money is disemboursed to realize the budget is called budgetary execution (in Portuguese, "execução orçamentária").
It´s up to the Executive to coordinate the budgetary execution. The Executive controls how much revenue is being collected, and chooses which projects of the Budget will be carried out first. Obviously, some expenditures like personnel and debt service must follow a rigid schedule.

The Executive, however, can use the discretion to choose which amendments will be priorized. And it´s a well known fact that the Deputies and Senators who are allies of the government have their amendments easierly approved, notably when the government needs votes to approve some controversial matters. This happened in government FHC, and still happens in government Lula.

(Added: This page by O Globo gave notice, that, on the same day that the provisional measure about the minimum wage was being voted, the Official Gazette was authorizing the transfering of R$200 million for individual ammendments.
O Globo makes it clear that there is a correlation between money and votes. Also, the article mentions that PP and PTB were satysfied with the funds released, but PL was troublesome and the Communist Party (to which Aldo Rabelo, the major official negotiator, belongs!) was the worst of all (PCdoB wanted, yes, the money, but wanted also other funds promised early).

Unethical as it can be, there is nothing to prevent the President from choosing which budgetary expenditures will be authorized. It´s the Brazilian law.
Reports about the Budgetary Execution can be found at the website of the Secretary of Treasury


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