Politics of YESS: Year-End Spending Spikes and Policymaking in Brazil

• In Event: Assessing Democratic Brazil: Institutions, Traditional Politics and New Issues

Abstract

Intergovernmental transfers allow governments to redistribute critical resources, but peculiarities of the fiscal calendar can easily distort this important policy mechanism. A hyper concentration of resource distribution at the end of the fiscal year in many countries – known as year-end spending spikes (YESS) – can have major implications for government efficiency. Recent scholarship and our qualitative interviews in Brazil suggest that year-end spending is less efficient than spending at other times of the fiscal year, since many government agencies punish bureaucrats that return left-over funds. However, the extent of YESS dynamics and their impacts on policy making may depend on different electoral and institutional incentives. Under which conditions do we see YESS dynamics, and how does this shape the efficiency and programmatic nature of intergovernmental transfers? This study focuses on discretionary expenses (Voluntary Transfers from the Union - Transferências Voluntárias da União) carried out by the Brazilian Federal Ministry of Regional Development (Ministerio de Integração Nacional) and Ministry of Cities during 2010-2022. The first modality consists of amendments that legislators address to the Ministry, intended for their electoral bases; these are financed by funds allocated to each legislator (emendas parlamentares). The second modality consists of transfers established by the ministry itself, based on its own criteria, programs, and goals of the political coalition that runs the ministry. We find pronounced YESS dynamics in discretionary spending by the federal agencies, especially for spending initiated by the executive branch, and we are conducting qualitative interviews with current and former federal bureaucrats to understand the mechanisms driving our empirical findings. We explore how YESS dynamics vary based on the type of infrastructure/program requested, the party/coalition of the requesting legislator, the party/coalition of the receiving entity, and changes in YESS patterns after the 2016 budget law. We evaluate whether projects funded in December are less efficient, or less likely to be fully spent in the future, than those initiated in other times of year. Our findings contribute to broader political economy dynamics about the (in)efficiency of discretionary intergovernmental transfers and the impact of fiscal budget cycles on programmatic or particularistic policymaking and public service provision.

Authors

• Alicia Dailey Cooperman, George Washington University

• Lizandro Lui, FGV

• Ismael Deus Marques, Independent Researcher