State governments investments grew in 2021 at vigorous rates not only compared to 2020 but also to 2017, the year before last of the Michel Temer administration’s term. Investments in the 26 states and the Federal District Brasília last year totaled R$75.9 billion, with a real increase of 83.6% compared to the previous year. In comparison with 2017, the real increase was 46.6%.

The data shows that the growth in revenues due to extraordinary transfers in 2020 and the good performance of the collection last year provided resources for a resumption of investments at a higher level than in the previous term. For this election year, part of the states is already planning to go even further with investments. Roads and infrastructure in the areas of health, education and security are among the priorities.

The investments’ growth rate stands out even more taking into account the behavior of the main expenses groups. Spending on personnel and social charges by the states in total fell by 5.2% in real terms in relation to 2020 and 5% in relation to 2017. In the same comparison, current expenses rose 2.9% against the previous year and fell 0. 5% compared to 2017. Current revenues soared. Considering all the 26 states and the Federal District, these revenues totaled R$1.03 trillion 2021 — up 8.1% over the previous year and 13.5% over 2017.

For specialists, the investment scenario was provided by an extraordinary outlook that led to revenue growth and large cash balances. They point out that the factors that allow the increase in revenue are temporary and caution is needed in the application of these resources.

Juliana Damasceno, researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and economist with Tendências, recalls that the transfers of resources intended to combat the pandemic in 2020 to states and municipalities exceeded R$89 billion and ended up, in many cases, going beyond the recovery of lost revenue that year. Additionally, last year, she says, the combination of exchange rate, inflation and commodity prices also favored State revenues, both through their own collection and through mandatory transfers from the federal government.

“Many states saw their coffers full,” says Ms. Damasceno. The concern, she says, for future terms, is that the current situation will result in spending decisions that will permanently impact state expenditures. What can already be seen, she points out, are pressures for salary readjustments in this election year.

Gabriel Leal de Barros, chief economist at RPS Capital, points to similar fears. In addition to payroll expenses, some investments can also lead to an increase in mandatory costs. Works such as hospitals, he points out, are an example. The concern, he says, is that not all states have taken structural measures to contain spending. The evolution of personnel expenses, which fell in real terms in the total of last year, was favored by conjunctural factors. The expenditures of the previous term, he says, suffered with the contraction of resources.

And in the last two years, says Mr. Barros, personnel expenses ended up being limited by Complementary Law 173, of 2020, the same that determined the extraordinary transfers of resources from the federal government to tackle the economic effects of the pandemic. This law, he explains, restricted the salary readjustment until the end of 2021. He points out, however, that some states have implemented social security and administrative reforms that are already beginning to show results.

Part of the states that advanced with investments last year intend to continue on the same route this year. In São Paulo, according to data from the state’s fiscal report, investments stated in the reports totaled R$17.9 billion in 2021, with a real increase of 98.3% compared to the previous year and 35.4% against 2017.

State Finance secretary Henrique Meirelles says that if you add up the financial investment accounts, which, in the case of São Paulo, he says, corresponded to investments, the total amount comes close to R$26 billion. According to him, this should be increased to around R$40 billion in 2022. “There are 8,000 works already underway, including roads, schools, hospitals and in the area of public security, generating 200,000 jobs.” A good part of the investment this year, he says, will be financed by the state government’s cash balance. According to Mr. Meirelles, at the turn of 2021 the state’s cash position was R$47 billion. Contributed to this result, he says, the administrative reform, which helped to keep expenses contained.

Last year, according to fiscal reports, São Paulo’s current revenues advanced 9.4% in real terms compared to 2020. This year, Mr. Meirelles does not expect the same performance.

Source: Valor International

https://valorinternational.globo.com