Brazil Congress Starting to Vote on Key Austerity Bills

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Brazil’s Congress is scheduled to start voting on legislation on Tuesday that Finance Minister Joaquim Levy says is crucial to averting a credit downgrade to junk.

The lower house on Tuesday is due to decide on a bill that would boost import levies and on Wednesday may vote on separate legislation to raise payroll taxes. Both would go on to the Senate if approved. The Senate is scheduled to vote Wednesday on a third measure that already passed the lower house that makes it harder for workers to access jobless insurance.

Levy is lobbying lawmakers who are reluctant to back the proposals amid rising unemployment and the threat of recession. Investors will keep a close eye on voting after members of the ruling alliance last week rebelled against the government and passed an amendment to raise spending on pensions, said Carlos Kawall, chief economist at Banco Safra.

“This is a crucial week,” Kawall, who was Brazil’s treasury secretary under the previous president, Luiz Inacio Lula da Silva, said by telephone Monday. “The coalition is not that solid; they are not as united as they needed to be regarding the measures. It’s a politically challenging scenario.”

Brazil’s benchmark Ibovespa stock index, which declined last year, has increased 11 percent since Levy entered office in January pledging to shore up fiscal accounts.

The Senate on Tuesday evening accepted President Dilma Rousseff’s nominee to the Supreme Court, Luiz Edson Fachin, by 52 to 27. The decision came just minutes after it rejected by one vote her selection to represent Brazil at the Organization of American States, Guilherme Patriota.

The government meanwhile has until Friday to announce how much spending it will freeze out of this year’s budget. The cutbacks come as Levy tries to reverse a 2014 budget deficit with a surplus before interest payments equal to 1.2 percent of gross domestic product this year.