The economics professor Jose Luiz Pagnussat believes that the Proposed Amendment to the Constitution (PEC) 241 will give confidence to investors, business travelers and families. In the evaluation of it, this measure may represent a turning point for Brazil.

The PEC, which was approved in the first round by 366 votes in favor and 111 against, create a new tax regime in the country. Once approved, the budget of a year may grow only equivalent to inflation of the previous year.

In practice, this means a zero real growth. With this new dynamic in the public accounts, the Executive and the Legislature will have to make a more intense debate about where to allocate resources, which will increase the quality and efficiency of public spending.

Pagnussat argues that if nothing was done, the trajectory of the public debt would reach an unsustainable level. "At some point it has to be paid and would have to be done by collecting more taxes. This creates great uncertainty for economic activity and, consequently, reduced investments and fall of the economy, "he says.

PEC 241 and the Public Debt

He argues that with the adoption of a strong measure that will lead to a gradual reduction of public spending and a resource surplus to reduce debt, confidence in the future will grow back. "The expectation is that we have increased savings, investment, and an acceleration of growth," he says.

The PEC will run for 20 years, but in the original government proposal, in ten years may be revised. The approval of the PEC depends on two shifts in the House of Representatives and two in the Senate by three fifths of deputies (308 votes) and the Senate (49 votes).

Now, the so-called PEC of public spending needs to be second vote in the House and then proceeds to evaluation of senators. The President of the Senate, Renan Calheiros (PMDB-AL), promised to speed the processing of the proposal.