Beyond economics: analyzing the political dynamics of the Fiscal Recovery Regime of Brazilian states

Abstract

The Fiscal Recovery Regime, a federal bailout instrument for states in severe fiscal crisis, was first implemented in the state of Rio de Janeiro in 2017. Following its modification in 2021, in addition to RJ, the states of Goiás, Minas Gerais, and Rio Grande do Sul joined the Regime. Some authors have focused thus far on understanding the economic implications of the RRF for the fiscal autonomy of states and have warned about the complexity of the required measures. However, the argument of this text starts from the premise that there is a lack of understanding of the political factors involved in the process from negotiation to implementation of the RRF. To do so, the projects and discussions undertaken in the National Congress and state assemblies were analyzed, as well as statements and data on the execution of the plans. The results show that the actions of key actors, such as the President of the Republic and governors, were essential for the establishment of the Regime, but other figures were also important, such as the Supreme Federal Court. Additionally, the information helps us understand the modifications the RRF underwent and what we can expect from the coming years of its execution.