Rousseff Wins Breakthrough as Brazil Senate Backs Austerity Plan

Brazil’s President Dilma Rousseff scored a breakthrough in her drive to shore up public accounts with Congress approving three key bills to cut spending and raise taxes.

The Senate on Wednesday evening voted to limit sick leave and pension payments and on Thursday approved an increase in import taxes, sending the legislation to Rousseff for approval. Congress on Tuesday night passed a separate bill that reduces jobless benefits. The three proposals combined could save the government an estimated 15.7 billion reais ($4.9 billion) a year.

The victories show how the Rousseff administration, trying to regain investor confidence, can still secure votes from lawmakers who are reluctant to approve cuts to worker benefits as unemployment surges. It now must push through Congress another bill to raise payroll taxes amid the fastest inflation in more than a decade.

“It’s a major victory for the government, but we shouldn’t celebrate yet,” Gabriel Petrus, a political analyst for the business consulting firm Barral M Jorge in Brasilia, said. “The biggest test is yet to come with the payroll-tax bill that faces much more opposition.”

The real fell 1.2 percent to 3.1778 per U.S. dollar at 12:52 p.m. in Sao Paulo as the dollar extended its rally after the Federal Reserve signaled it will raise borrowing costs.

On Wednesday, the real gained for the first time in five days following the legislative win on jobless benefits Tuesday night. The currency last week fell the most in more than two months as senators in the ruling alliance said they would block austerity measures.

The lower house in June is scheduled to start voting on legislation to reverse payroll-tax exemptions that would boost government revenue by an estimated 12.8 billion reais in a year.

Some companies, including the Brazilian division of carrier LATAM Airlines Group SA, say the payroll legislation would raise their costs as the economy falters.

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