Institutional relations in state-owned enterprises

AutorMichael Freitas Mohallem, Beto Vasconcelos and Guilherme France
Ocupação do AutorProfessor at FGV Rio Law School/Professor at FGV Rio Law School/Researcher at FGV Rio Law School
Páginas34-37
Transparency Internacional – Brazil34
INSTITUTIONAL RELATIONS IN
STATE-OWNED ENTERPRISES
98 However, legislative authorisation will not be required in order to approve a role structure or create new positions within a SOE — these are functions that
may be carried out through internal acts. SOEs are, therefore, outside the scope of article 61, §1, II, of the Federal Constitution. ARAGÃO, A. Empresas
estatais: o regime jurídico das empresas públicas e sociedades de economia mista. São Paulo: Forense, 2017, p. 367.
99 Some examples of dependent SOEs are Conab, Codevasf and Embrapa.
100 ARAGÃO, A. Empresas estatais: o regime jurídico das empresas públicas e sociedades de economia mista. São Paulo: Forense, 2017, p. 285-7.
The political relationship between the
Legislative branch, the Executive branch and
SOEs has already been discussed in the first
lines of this paper. In this section, the analysis will
focus mainly on the control mechanisms available
to the aforementioned branches of government
concerning institutional relations and the operation
and administration of SOEs.
LEGISLATIVE BRANCH
The starting point for exercising this control
is obtaining the mandatory authorisation from
Congress (at the national level), Legislative
Assemblies (at the state level) or City Councils
(at the municipal level) for the set up of any
public enterprise or mixed-capital company.
This authorisation is a requirement imposed by
the Federal Constitution (article 37, XIX), which
determines that, in order to set up each SOE, and
to define its areas of activity, a specific, ad-hoc
law must be enacted98.
Another form of the Legislative branch’s control
over SOEs refers to the approval of their annual
budgets and the control of budget execution.
This control is based on the determination that
the annual budget law will comprise both “the
investment budget of companies in which the
Union directly or indirectly holds the majority of
voting capital” (article 165, §5, II, of the Federal
Constitution) as well as the fiscal and social
security budgets (article 165, §5, I and III). This
important distinction, however, must be clarified
in order to understand the variation in the scope
of this budget control.
SOEs are considered dependent when
they do not have an investment budget, their
budget resources, originating from the National
Treasury, is coming from the fiscal or social
security budget (article 165, §5, I and III)
99
. In
turn, independent SOEs are those whose resources
derive from the SOEs’ Investment Budget (OI,
the “Orçamento de Investimento das Empresas
Estatais” in Portuguese), and not directly from the
National Treasury. By being allocated to the OI,
the expenses of independent SOEs are ensured
greater administrative and financial autonomy. The
organ responsible for the elaboration of the OI is
SEST, the aforementioned organ of the Ministry
of Planning. The main practical implication of
this differentiation is that dependent SOEs are
subject to the same tax restrictions as the rest of
the direct public administration, mainly via the
Fiscal Responsibility Act, which has already been
recognised by the Federal Accounting Court itself
(Appellate Decision 357-2015)100.
It should also be noted that transfers of
public funds to cover a possible operational
deficit of independent SOEs are allowed only

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