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Brazil's Lower House Approves Government Bill to Cut Labor Perks

Wednesday, 06 May 2015 09:27 PM

(Bloomberg) -- Brazil’s lower house approved reductions to labor benefits that Finance Minister Joaquim Levy had proposed to shore up public accounts.

Lawmakers on Wednesday passed a modified version of the bill that provides less savings than the government had originally wanted. The legislation makes it harder for Brazilians to access unemployment insurance. Lower house members approved the basic text of the bill and are scheduled to vote on amendments Wednesday and Thursday.

The vote is the first big test of President Dilma Rousseff’s ability to push through Congress austerity programs designed to avert a credit-rating downgrade. Lawmakers delayed the vote on Tuesday after members of the ruling Workers’ Party wavered in their support for the legislation.

The bill is one of two key measures to cut social-security benefits that Levy’s team initially forecast would lower spending by 18 billion reais ($5.9 billion) in 2015. Budget Minister Nelson Barbosa said Wednesday afternoon the two bills would save as much as 14.5 billion reais, even with amendments added by legislators.

Regardless of the outcome in Congress, Rousseff will stick to the government’s fiscal target this year, Social Communication Minister Edinho Silva told reporters in Brasilia.

“Under no circumstances will the ongoing negotiations distort or undermine the target of the adjustment,” Silva said.

Holding its ground in the upper house may be more difficult for the government, analysts at political consulting firm Eurasia Group wrote in a May 5 research note.

‘Bigger Risk’

“In the Senate, the bigger risk is its president, Renan Calheiros, who is positioning himself to be a defender of labor rights,” according to the note. “Additional watering-down of the measures is possible at this stage, at which point they would go back to the lower house.”

Delays in the vote prompted the real to fall as much as 0.6 percent on Wednesday. The currency later erased losses and gained 0.7 percent to 3.0347 per U.S. dollar, fueled in part by speculation the U.S. will delay interest-rate increases.

Levy early this week urged Congress to approve his belt- tightening agenda quickly, saying failure to do so could put at risk Brazil’s investment-grade status. Vice President Michel Temer on Monday said the government will have to make major reductions in spending if Congress fails to act.

The labor bill approved by the lower house already is in effect because it was sent to Congress as a presidential decree. That decree will expire and the government’s measure will be scrapped entirely if lawmakers fail to approve the legislation by June 1.

--With assistance from Maria Luiza Rabello in Brasilia Newsroom.

To contact the reporters on this story: Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net; Raymond Colitt in Brasilia Newsroom at rcolitt@bloomberg.net To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net Randall Woods

© Copyright 2017 Bloomberg News. All rights reserved.

   
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2015-27-06
Wednesday, 06 May 2015 09:27 PM
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