Law No. 12,053, Dated 9 October 2009

Original Language Title: Lei nº 12.053, de 9 de Outubro de 2009

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LEI No. 12,053, DE October 9, 2009.

Altera the arts. 2º, 3º and 7º and Annex IV to Law No. 11,768 of August 14, 2008, which has on the guidelines for the drafting and implementation of the Budget Act of 2009 and gives other arrangements.

THE PRESIDENT OF THE REPUBLIC I do know that the National Congress decrees and I sanction it following Law:

Art. 1º Law No. 11,768 of August 14, 2008, passes vigorously with the following changes:

" Art. 2º The implementation of the Budget Law of 2009 should be compatible with achieving the primary surplus target, for the consolidated public sector, equivalent to 2.50% (two integers and fifty hundredths per cent) of the Gross Domestic Product, being 1.40% (an integer and forty hundredths per cent) for Fiscal and Social Security Budgets and 0.20% (twenty hundredths per cent) for the Global Dispendiums Program, as demonstrated in the Annex of Fiscal Targets in Annex IV of this Law.

§ 1º The companies of the Petrobras Group will not be considered in the primary surplus target, of which it treats the caput of this article, relative to the Global Dispendic Program.

§ 2º There can be compensation between targets established for Fiscal Budgets and Social Security and for the Global Dispendian Program that treats art. 11, inciso VI, of this Act. " (NR)

" Art. 3º The surplus to which the art refers. 2º of this Act will be reduced by up to R$ 28,500,000,000.00 (twenty-eight billion and five hundred million reais), for the fulfillment of expenses under the Growth-CAP Acceleration Program, whose schedules will be identified in the law fiscal 2009 with the primary result identifier predicted in art. 7º, § 4º, inciso IV, of this Act.

§ 1º The value of which treats the caput of this article may be increased from the amount of the remains to be paid from the CAP, identified in the Integrated Financial Administration System of the Federal Government-SIAFI pursuant to § 7º of the art. 8º of Law No. 11,514 of August 13, 2007, as well as those relating to expenses whose primary result identifier is'3'.

§ 2º (VETADO). " (NR)

" Art. 7th ..........................................................................................................................

...............................................................................................................................................

§ 4th .................................................................................................................................

...............................................................................................................................................

IV-discretion primary relative to the CAP (RP 3) ;

................................................................................................................................................

§ 6º The subtitles framed in the PAC no will be able to cover appropriations with a primary result identifier other than 3 (RP 3).

....................................................................................................................................... " (NR)

Art. 2nd item IV.1 of Annex IV to Law No. 11,768, 2008, passes in the form of the Annex of this Act.

Art. 3º This Act comes into force on the date of its publication.

Brasilia, October 9, 2009 ; 188th of the Independence and 121st of the Republic.

LUIZ INACIO LULA DA SILVA

Paulo Bernardo Silva

ANNEX

(Annex IV-Tax Targets of Law No. 11,768 of August 14, 2008)

IV. 1-Annual Fiscal Targets

(Art. 4th, § 1st, inciso II of § 2nd of the Supplementary Law no 101, May 4, 2000)

In compliance with the provisions of the Supplementary Law no 101 of May 4, 2000, the Accountability Act Fiscal-LRF, the Annex of Annual Goals of the Budget Guidelines Act 2009, LDO-2009, sets the primary result target of the consolidated public sector, as percent of gross domestic product, for the 2009 financial year and indicates the targets of 2010 and 2011. At each financial year, with changes in the internal and external macroeconomic scenario, the targets are reviewed in the sense of maintaining responsible fiscal policy.

The primary goal of the government's fiscal policy is to promote balanced management of resources public, in order to ensure the maintenance of economic stability and sustained growth. For this, acting in line with monetary, credit and currency policies, the government seeks to create the necessary conditions for the gradual reduction of net public borrowing in relation to GDP, the reduction in interest rates and the improvement of the profile of the debt. In this sense, annually, primary result targets are set in the intention of ensuring the intertemporal solvency of public debt. In turn, the nominal result and the stock of public sector debt are merely indicative, for suffering influence from a number of factors outside direct government control.

It is also a commitment of fiscal policy to promote the improvement of fiscal management results, with seen to implement redistributive social policies and to finance infrastructure investments that extend the domestic capacity of production by the private sector, through the elimination of logistical bottlenecs. The government also has been acting in improving the quality and simplification of taxation, in combating evasion, evasion and fiscal elision, in reducing informality, in enhancing the mechanisms of fundraising and supervision, with a goal of increase the universe of taxpayers and allow for the reduction of the tax burden on the diverse segments of society. It has also sought to enhance the efficiency of resource allocation, with measures of rationalization of public spending, with improvement in control techniques and greater transparency, so as to broaden the provision of quality public services.

In turn, redistributive social policies, such as the income transfer programs and the minimum wage recomposition policy, have contributed to economic development with greater social justice and to increased domestic demand. The latter has also been strengthening through the increase in federal public investment, which has gone from 1.7% of GDP in 2003 to 3.2% of GDP in 2008, perking up a cumulative growth of 92% in the period. The success of the consolidation of economic stability, carried out over the past six years, combined with the effort to expand investments in the revitalization of physical infrastructure within the framework of the Growth Acceleration Plan (CAP) and with the improvement in household income in the poorest sections, created conditions for faster growth of the economy in 2008.

The gross domestic product grew by 5.1% in real terms in 2008, giving continuity to the cycle of sustained growth started in 2004, averaging 4.7% over the past five years and with significant expansion of productive capacity (9.9% average change in investment in the period). That trajectory, however, suffered sharp deceleration with the international crisis's acceleration from September as it went from a growth of 6.8% in the third quarter, from the same period a year earlier, to 1.3% in the last quarter. In addition, inflation expectations for 2009 measured by the IPCA, which had distanced itself from the center of the target with heated internal demand and inflationary pressures of external origin, came back to adjust, due: i) to the monetary constraint measures adopted by the Central Bank from April to September 2008 ; and ii) as of September, to the effects of the international crisis on internal and external activity, which restricted the external credit supply and negatively affected the price of the commodities.

As for external accounts, current transactions presented the first deficit in 2008 (1.78% percent of the GDP) after five years of positive balance, due mainly to high growth in imports, to meet the heated demand, and to the largest shipment of profits and dividends, with a view to raising corporate profits, valuation of the exchange and the need to shape arrays with financial problems. The negative balance in current transactions, however, was financed with slack by the record in the net inflow of foreign direct investments in the Country (2.84% of GDP). Current account surpluses observed since 2001 and the strong flow of resources from foreigners to the Country have enabled the reduction of gross external debt of the central government, with the discharge of the loans to the IMF, the Paris Club and others, and the expressive growth of international reserves. As a consequence, the Country achieved the position of net external creditor in January 2008, which together with maintenance of a responsible economic policy, led to the degree recognition of long-term foreign debt investment by the two major world risk agencies in April and May of the same year. The maintenance of balanced external accounts, coupled with fiscal and monetary responsibility, has contributed to the risk-country holding below the average of the major emerging economies. Even at the end of 2008, when the worsening crisis raised the risk of emerging countries, Brazil has presented level and at-risk trajectory better than the average of that group of countries.

In 2008, as a result of the fiscal effort of all spheres of government, the public sector non-financial achieved primary result of 4.07% percent of GDP, higher than the target set for the year, pertaining the lowest nominal deficit in the annual historical series, of 1.5% percent of GDP. That result included the R$ 14.2 billion pass (about 0.5% of GDP) for the Sovereign Fund, with the purpose of promoting investment, extending public savings, mitigating the effects of economic cycles and fostering projects of interest strategic of the Country. The reduction in the nominal deficit, coupled with the growth of the product and the impact of currency devaluation on the central government's net external assets, allowed the fall in the net debt of the public sector as a proportion of GDP, which went from the platter 42.0% in 2007 to 36.0% in 2008. In addition, the government has been able to lower the refinancing and debt market risks by improving the maturities of maturities, as well as by reducing the federal debt vulnerability to fluctuations in economic variables (exchange and interest). Thus, even in the environment of higher volatility in the price of global financial assets and the elevation of risk premiums, the Country managed to maintain, in 2008, the improvement in the composition of federal government debt (DPF), achieved in recent years, with lower proportion of gainful securities to indexers considered to be more volatile. There was also a stay of the policy of elongation of the average and falling percent of the percentage to be won in 12 months, from 28.2% in 2007 to 25.4% in 2008.

The outlook for 2009 indicates real GDP growth of 2.0% percent. The positive growth estimate with deceleration, in a scenario of worldwide economic retrenchment, stems from the specific characteristics of the Brazilian economy and the policy instruments available by the government. The Brazilian banking system has strict prudential rules in international terms and has remained solvent throughout the period, which has minored the impact of a global financial crisis on the domestic financial system. In turn, the performance of public banks has made it possible to offset lower credit in some sectors by means of government policies. In this sense, the government has increased the credit supply of public banks for investment and business spin capital, for export financing (BNDES), the real estate sector (Federal Economic Box) and the agri-livestock sector, and for the micro and small businesses (Banco do Brasil).

The monetary policy performance by the month of September and the sharp drop in domestic demand and external after that period reversed inflation expectations and, consequently, extended the monetary policy space to stimulate economic activity. The prediction of lower price variation will not only contribute to maintaining the purchasing power and consumption of households, but will also allow the monetary authority to have more degrees of freedom to encourage domestically demand. In turn, the flexible exchange regime allows for a faster adjustment of relative prices and tends to alleviate the effects of international crises on employment and income in Brazil. The commitment to maintaining the monetary stability environment has raised the trust of the external investor in Brazil and, consequently, the entry of foreign capitals, through direct investment and in portfolio. Despite this flow declining after the worsening crisis, a rapid resumption is expected with the expectation of improvement on the international stage, in view of the fact that the adopted macroeconomic policy has not been changed.

The largest volume of international reserves and the condition of net creditor in foreign currency has increased the ability of the Country to face periods with external liquidity restriction. Based on this greater reserve of resources, the monetary authority has taken the necessary steps for the demand for external credit to be met, by injecting liquidity into the spot and future market and by ensuring that exporters and importers, as well as banks and companies with external debt maturing in 2009, have access to lines of credit.

In this context, the primary surplus target for the non-financial public sector in 2009 is set in 2.5% of GDP, in addition to the additional use of the Growth-CAP Acceleration Program's constant investments in the maximum amount of R$ 28.5 billion, in order to stimulate domestically demand in a lower growth scenario. It is worth noting two modifications in relation to the current targets up to 2008: (i) a methodological and permanent change, which consists of the exclusion of companies from the Petrobras group of federal state firms considered in the calculation of public sector debt non-financial and, consequently, of the primary surplus target ; and (ii) a temporary change, in order to suit the target of 2009 at the time of international financial crisis.

In relation to the treatment conferred on the companies of the Petrobrás group, the proposed exclusion considers that the company is fully market-oriented, running on an equal footing with private companies with regard to the exploration, production, refining, transportation, import and export of natural gas, oil and its derivatives. In terms of qualified governance practices, the company follows rules identical to those of the other private equity firms, being subject to external audit and regularly publishing accounting for accounting for the domestic market (Securities and Exchange Commission-SEC, US), as well as adopting good relationship practices with minority shareholders. Petrobrás is among the 10 largest oil companies in the world with shares traded on stock exchanges, owns financial net assets of around 3.0% percent of GDP and has autonomy to pick up resources in the national financial market and international.

This set of characteristics sets up as a distinctive element of the company as to the delimitation of the comprehensive Brazilian public sector. In addition, the maintenance of the tax restrictions on the Petrobras group causes distortions in the company's managerial decisions, in particular as to the limitation of the possibilities of conducting investments in economically viable projects, compromisation, thus, its competitive ability in the sector in which it acts.

In this way, the composition of the fiscal target will be changed by 2009 over 2008: i) of 2.15% of GDP for 1.40% of GDP in the case of the central government, by virtue of the need for anti-cyclical acting, via increment of public investments, private sector stimulus, and maintenance of social programs ; ii) of 0.75% of GDP to 0.20% of GDP in the case of the federal state, by the exclusion of companies from the Petrobrás group of the companies as a whole ; and iii) revision of the estimates of 0.95% of GDP to 0.90% of GDP for sub-national governments, basically depending on the lowest estimated revenue. Despite the lower primary result, the net debt of the public sector as a proportion of GDP will remain relatively stable, passing from 39.1% in 2008-already considering the impact of the Petrobrás group's exclusion from public indebtedment-to around 39.4% of GDP in 2009.

It is up to point out that, in relation to the central government's target, the realization of the investments foreseen in the Growth Acceleration Plan (CAP) and the maintenance of social programs that raise the income of poorer households (with higher propensity to consumption), such as the Family Exchange, the valorisation of the minimum wage, the Program of Strengthening Family Agriculture (Pronaf), extending the time of receiving unemployment-unemployment for workers fired from the sub-sectors hardest hit by the crisis and the housing program of popular housing construction (My house, my life).

After going through a period of deceleration in 2009, the economy is expected to resume the trajectory of sustained growth in triium 2010-2012, with recovery already in the second half of 2009 (Table 1). A relatively faster recovery of the domestic market is expected, too, in view of the adopted anti-cyclical policies and the credibility achieved after a long period of commitment to responsible fiscal management and monetary policy condized with economic stability. In this way, the annual real GDP growth is estimated at 4.5% percent to 2010 percent and by 5.0% percent a year in the biennial 2011-2012, with relatively stable exchange rate in the period, progressive decline in real interest rates and maintaining inflation rates. consistent with the target set by the National Monetary Council-CMN for the whole period.

Table 1-Macroeconomic Parameters Designed

Variables

2009

2010

2011

GDP (real growth% a. a.)

2.00

4.50

5.00

Effective Selic Rate (average% a.a.)

10.80

10.21

10.07

Exchange (R$/$-period-end-December)

2.30

2.25

2.25

For 2010, the primary surplus target is set at 3.3% percent of GDP for the public sector non-financial and is held at that level in the following two years. The Central Government's annual primary surplus target for the next trial is to return to the target set in the 2009 budget bill of 2.15% percent of GDP, which amounts to R$ 72.6 billion in 2010. The target of federal state-owned enterprises, for their part, remains at 0.20% percent of GDP for the next three years, equivalent to R$ 6.7 billion in 2010. Thus, the Federal Government's primary surplus will be 2.35% of GDP for the aforementioned trienium, corresponding in 2010 to R$ 79.4 billion. It is to be mentioned that, under the government's commitment to fiscal balance, should the estimated primary surplus estimate of 0.95% of GDP predicted in the state and municipal level not be verified, it will be offset by the federal government in order to achieve the global target of 3.30%.

Table 2-Estimated Trajectory for the Public Sector Net Debt and for the Nominal Result

Variables (in% of GDP)

2009

2010

2011

Primary Surplus of the Non-Financial Public Sector

2.50

3.30

3.30

Forecast for the recognition of liabilities

0.22

0.24

0.19

Net Debt with the recognition of liabilities

39.4

36.9

34.0

Nominal Result

-2.12

-0.76

-0.38

* Does not consider the reduction relative to the Growth-PAC Acceleration Program.

The primary surplus of 3.3% percent of GDP, the projected growth of the economy, and the reduction of the cost of the pubic debt will allow the continuity of the trajectory of falling net public sector public sector debt as a proportion of GDP over that period (Table 2). Even considering the recognition of contingent liabilities (basically through the issuance of CVS), the trajectory of net public debt as a proportion of GDP remains with decreasing trend, going from 39.1% in 2008 (excluding the assets liquids from the Petrobrás group) to 31.2% in 2012. Projections also indicate that the Country will be able to achieve close nominal result of zero in 2012, i.e. very close to obtaining the ability to pay the totality of the net interest due in the financial year. These targets therefore confirm the government's commitment to fiscal responsibility, which will contribute to macroeconomic stability and sustained growth with social inclusion.

Annex IV. 1 a-Annex of Annual Fiscal Goals

Current Prices

Discrimination

2009

2010

2011

R$ million

% GDP

R$ million

% GDP

R$ million

% GDP

I. Revenue First

756,946.7

24.48

816,717.0

24.18

896,142.7

24.18

II. Primary Expense

713,658.7

23.08

744,106.5

22.03

816,470.8

22.03

III. Central Government Primary Result (I-II)

43,288.0

1.40

72,610.5

2.15

79,671.9

2.15

IV. Primary Result Federal State Companies

6,184.0

0.20

6,754.5

0.20

7,411.3

0.20

V. Primary Government Result Federal Government (III + IV)

49,472.0

1.60

79,364.9

2.35

87,083.2

2.35

VI. Nominal Federal Government Result

-52,871.0

-1.57

-9,728.0

-0.29

3,539.0

0.10

VII. Federal Government Net Debt

785,324

24.80

795,977.0

23.00

791,864.0

20.90

Observations:

(1) The goal can be reduced by virtue of the resources programmed for the-Acceleration program of the Growth-PAC.

(2) Do not consider companies of the Petrobrás group.

Average Prices of 2009-IGP-DI

Discrimination

2009

2010

2011

R$ million

% GDP

R$ million

% GDP

R$ million

% GDP

I. Revenue First

756,946.7

24.48

779,750.2

24.18

818,737.7

24.18

II. Primary Expense

713,658.7

23.08

710,426.2

22.03

745,947.5

22.03

III. Central Government Primary Result (I-II)

43,288.0

1.40

69,323.9

2.15

72,790.1

2.15

IV. Primary Result Federal State Companies

6,184.0

0.20

6,448.7

0.20

6,771.2

0.20

V. Primary Government Result Federal Government (III + IV)

49,472.0

1.60

75,772.7

2.35

79,561.3

2.35

VI. Nominal Federal Government Result

-52,871.0

-1.57

-9,287.7

-0.29

3,233.3

0.10

VII. Federal Government Net Debt

785,324

24.80

759,948.9

23.00

723,466.1

20.90

Observations:

1) The goal can be reduced by virtue of the resources programmed for the-Acceleration program of the Growth-PAC.

(2) Do not consider companies of the Petrobrás group.