Rousseff Gains Momentum as Brazil Congress Upholds Vetoes

  • Vetoes prevent spending from rising by more than $12 billion
  • "This is an important victory" -- analyst Thiago Vidal

Brazil’s Congress upheld presidential vetoes of legislation that would have increased fiscal expenditures, providing a boost to the government as it strives to close the budget gap and quell a political crisis.

In a joint session of Congress Tuesday night, legislators sustained two presidential vetoes of measures that would have granted salary increases to judiciary workers and tax breaks for teachers. Legislators suspended the session after midnight and resumed voting Wednesday afternoon, ratifying a third veto that prevents government pension obligations from rising in coming years.

President Dilma Rousseff issued the vetoes after Congress earlier this year rebelled against the administration by passing the legislation. Without the three vetoes upheld Tuesday and Wednesday, government expenditures would have grown by more than 47 billion reais ($12 billion) through 2019 and tax revenue would have fallen by 16 billion reais over the same period, according to government estimates.

The increased spending and lost revenue would have dealt a severe blow to the administration’s efforts to prevent further credit downgrades and revive investor confidence in Latin America’s largest economy.

Political Boost

The result also provides another boost to an administration working to improve relations with lawmakers amid calls to impeach the president. About a month after Rousseff gave her biggest ally greater control of the administration in a cabinet shakeup, the lower house on Nov. 11 approved government legislation designed to boost fiscal revenue by providing incentives to repatriate fortunes. This week’s votes provide even more evidence that Rousseff is beginning to shore up support in Congress, said analyst Thiago Vidal.

"This is an important victory," said Vidal, who works at political consulting firm Prospectiva. "This demonstrates a new beginning, a renewal of dialogue between the government and its base in Congress."

The real gained 0.8 percent to 3.7831 per U.S. dollar at 3:45 p.m. local time, buoyed by Rousseff’s victory in Congress.

Yet Rousseff isn’t without her concerns, as inflation and unemployment continue to surge amid the worst recession in over two decades. The country’s top electoral court is investigating whether she broke campaign-finance laws last year, and the speaker of the house pledges to decide this month whether to open impeachment hearings against her.

She also faces bigger legislative challenges, such as winning approval of a bill to help close the budget deficit by reviving a tax on financial transactions, known in Brazil as the CPMF. Public-opinion polls show the majority of Brazilians oppose the levy, as do leading political parties.

Her narrow victory in Tuesday’s vote on the vetoes also shows she doesn’t have a strong majority to comfortably push ahead with her economic plans in Congress. The opposition needed 257 votes out of 513 lower house deputies to overrule her veto. They garnered 251 votes. Rousseff had 132 votes in favor of her vetoes.

For now, pro-government lawmakers are celebrating.

"This was a great victory," the administration’s leader in the lower house, Jose Guimaraes, said Tuesday night. "I’m exhausted, but I feel like we accomplished something."

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