Brazilian Congress approves amendment creating South and Southeast development funds and raising municipal transfers

The Chamber of Deputies' Special Committee approved Constitutional Amendment PEC 231/2019, which establishes two new constitutional funds – one for the South region and one for the Southeast – each financed with 1 % of federal revenues from income tax, excise tax and selective tax. The first 0.5 % of each fund will be allocated from January 2027, with the remaining 0.5 % beginning in January 2028. The amendment also increases the Union’s contribution to the Fundo de Participação dos Municípios (FPM) by one percentage point, raising the share of federal tax revenue transferred to municipalities. According to rapporteur Deputy Arnaldo Jardim, the combined impact of the new funds and the higher FPM share is projected at R$ 49.67 billion over two years (R$ 16 billion in 2027 and R$ 33.6 billion in 2028). The measures aim to reduce regional inequalities by providing cheaper credit lines for productive and infrastructure projects in the South and Southeast, while strengthening municipal budgets across the country. The amendment still requires approval by the full Chamber and subsequent review by the Senate before becoming law.