Levy Scores Win as Brazil Congress Clears Cuts to Job Perks

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Brazil’s Senate approved legislation that makes it harder to access jobless insurance, handing the government a victory in its effort to shore up fiscal accounts.

The Senate in a 39 to 32 vote on Tuesday night supported the proposal that previously passed through the lower house, sending it to President Dilma Rousseff for final authorization. Senators earlier in the evening rejected amendments to the legislation.

The voting was the first of several hurdles that Finance Minister Joaquim Levy must clear this week after he was designated to lead Rousseff’s push to restore investor confidence. He will have to lobby Senators, including members of the ruling party who voted against Tuesday’s bill, to approve the remaining austerity measures amid faster inflation and rising unemployment.

“This was a victory, but a close one,” Andre Cesar, an independent analyst who previously worked at CAC Consultoria, said by phone. “This is a government that lacks a strong base and has to negotiate every single project.”

The Senate is scheduled to vote on separate bills Wednesday and Thursday to limit retirement benefits and boost taxes on imports that Levy says are crucial to shrink the budget deficit. The lower house already passed both measures, frustrating Levy’s efforts to save money by attaching an amendment that allows some workers to retire earlier.

Worst Performer

The real fell 16 precent since the start of the year, the worst performing emerging market currency, on doubts over the country’s economic recovery. The Bovespa, Sao Paulo’s benchmark stock index, fell 7.4 percent in the past five trading days.

Tuesday’s legislation will save the government an estimated 5 billion reais ($1.6 billion) this year. The lower house watered down some of the savings, giving the government less than it originally wanted.

Opposition Senator Ronaldo Caiado told reporters after Tuesday’s vote that lawmakers will try to make additional changes to the remaining bills. If they succeed, the modified legislation must go back to the lower house for another vote.

That would put at risk Levy’s efforts to reverse last year’s budget deficit with a surplus equivalent to 1.1 percent of gross domestic product in 2015, excluding payments on interest. As part of its strategy to hit that mark, the government last week pledged to freeze 69.9 billion reais in spending from this year’s budget.

Paulo Rocha, a member of the ruling Workers’ Party and a sponsor of Tuesday’s bill, said after the vote he’s confident the government austerity measures will pass through Congress.

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