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Brazil’s Fiscal Plan Could Falter Without Pension Reform

  • Spending cap without cutbacks on pensions would squeeze budget
  • Raising taxes next year is “Plan C,” Secretary Almeida says
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Acting President Michel Temer’s prized fiscal austerity proposal to cap public spending will only succeed if he can convince Brazil’s Congress to pass a controversial pension reform as well, according to a leading member of his economic team.

While Temer’s administration is confident it can win congressional approval this year of a constitutional amendment to limit federal spending, the inability to cut back on retirement benefits would put public finances at risk, said Mansueto Almeida, the Finance Ministry’s secretary of economic monitoring. A spending cap with growing pension obligations would squeeze other areas in the budget such as health care, he said.