Brazil’s Rousseff Faces Power Test on Congressional Budget Vote

Brazil’s Congress today is scheduled to vote on a budget bill that has become a key test of President Dilma Rousseff’s control over her coalition as she forms the remainder of her cabinet.

The bill presented last month would effectively eliminate this year’s fiscal target, thereby preventing opposition attempts to take legal action against the Rousseff administration for having failed to comply with the budget law. Allied legislators have been using their support for the bill as a bargaining chip to obtain more government posts in Rousseff’s second term starting Jan. 1, according to Eurasia Group consulting firm.

The vote scheduled to start at 6 p.m. local time is a test of strength for Rousseff, who won the Oct. 26 election by the narrowest margin of any president since at least 1945, and a defeat would leave her politically vulnerable, said Andre Cesar, an independent, Brasilia-based political analyst.

“She needs to win this battle to show she is in charge,” Cesar said in a phone interview. “The price will probably be giving more posts to her allies in the next term.”

The opposition Brazilian Social Democracy Party said the government was trying to conceal its mismanagement of the budget and was shortcutting congressional procedures to approve the bill.

“This proposal is another irresponsibility of Dilma,” said Ronaldo Caiado, member of the lower house budget committee for another opposition party, the Democrats.

Rousseff met last night with congressional leaders in an effort to ensure approval of the bill.

Budget Deficit

Brazil’s budget deficit more than doubled since Rousseff took office, to 5 percent of gross domestic product in the 12 months through October, as a slowing economy and tax breaks eroded revenue and government spending increased.

The bill submitted to Congress on Nov. 11 allows the government to increase the amount it can discount from the 2014 primary budget, which excludes payments on interest, to include all tax breaks and investments in infrastructure, according to a statement posted on the Planning and Budget Ministry website.

Cutting the budget target is coherent at a time of an international economic crisis, Henrique Fontana, lower house leader of the ruling Workers’ Party, told reporters after the meeting with Rousseff.

The president will probably face repeated standoffs with Congress as parties jockey for influential posts in her administration by advancing legislation she opposes, Eurasia Group said in a research note published yesterday.

“While we don’t expect major disruptions in the president’s agenda before the end of the year, coalition dynamics pose a major downside risk going forward as the president’s political capital diminishes,” Eurasia Group said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE