Brazil Central Bank Work Stoppage Tests Rousseff Budget Rigor

Brazilian central bank employees staged their first work stoppage in five years today in pursuit of higher wages, intensifying a wave of civil servant strikes that are testing President Dilma Rousseff’s fiscal discipline.

The one-day strike among the unionized staff at the bank’s headquarters in Brasilia and at regional branches began at 8 a.m. local time and could compromise some services, said Sergio Belsito, president of the employees union at the bank.

“The idea is to maintain operations that are most important to the market,” Belsito said by telephone from Brasilia. “But there may be delays at the currency and other operations desks.”

The central bank said it informed the union of the staff needed to operate essential services, including its international monetary reserve management and the bank’s Sisbacen information system, according to a spokesman who asked not to be identified due to internal policies.

The monetary authority is scheduled to announce today capital flows, banks’ currency positions and the commodity price index for July.

Work stoppages by civil servants began in July when staff at public universities, state-run power company Centrais Eletricas Brasileiras SA (ELET6) and several regulatory agencies walked off the job. They have since spread to include 14 federal agencies and 350,000 workers, according to the union of civil servants in Brasilia.

Wage Demands

The central bank union is demanding an average pay increase of 23 percent to compensate for inflation since June 2008, Belsito said. The union may call a longer strike later this month, he added.

The strikes have raised concern about whether the Rousseff administration will be able to contain demands for wage increases of as much as 30 percent, which could fuel inflation and add to already rising government spending this year, said Felipe Salto, a public finance economist at consulting firm Tendencias Consultoria Integrada in Sao Paulo.

“New salary increases and hiring would not be seen well in terms of the quality of public spending and macroeconomic stability,” Salto said by telephone. “The expectation that spending will continue to grow next year will affect inflation.”

The government is analyzing wage demands by unions and would conclude the negotiations by the end of the month, said a spokesman for the Planning and Budget Ministry who declined to be identified citing internal policies.

Economists forecast inflation of 5 percent this year, above the central bank target of 4.5 percent, according to the bank’s latest survey.

To contact the reporter on this story: Raymond Colitt in Brasilia at rcolitt@bloomberg.net.

To contact the editor responsible for this story: Philip Sanders at psanders@bloomberg.net.

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