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  HOME | Brazil (Click here for more)

Brazil Senate Approves Controversial Spending Cap

BRASILIA – Brazil’s Senate on Tuesday approved a controversial bill that will limit public spending growth to the inflation rate for the next 20 years.

The senators approved the spending ceiling proposed by President Michel Temer’s government by a wide margin – 53 votes to 16 – in the second of two votes.

The measure, which required an additional round of voting because the bill took the form of a constitutional amendment, had earlier been approved by the upper house on Nov. 29. The lower house of Congress gave its approval for the proposal – also over two rounds – in October.

Critics of the bill said it would impose severe cuts in areas – such as health care, education and aid for Brazil’s poorest – where government intervention is most needed.

The law will restrict the growth of federal government spending to the previous year’s inflation rate for the next two decades, although the ceiling is to be subjected to a presidential review after the first 10 years.

The government says the cap will halt a rise in public debt as a percentage of gross domestic product (GDP) and is essential for getting a large budget deficit under control.

Public spending in Brazil grew between 1997 and 2015 at a pace that was, on average, 6 percent higher than the previous year’s inflation rate, according to official figures. The Finance Ministry has called that level of spending “unsustainable.”

The government furthermore says that the growth in spending between 2008 and 2015 exceeded the prior year’s inflation rate by up to 50 percent and that administrations headed by the center-left Workers Party (PT) issued debt to finance those outlays, causing a drain on public coffers and adversely affecting economic activity in the recession-hit country.

PT Sen. Fatima Bezerra on Tuesday called for debate on the bill to be canceled and said Temer, of the Brazilian Democratic Movement Party, only wanted to cap spending growth for programs that benefit Brazilians living in extreme poverty, adding that his government has proposed no ceiling on repaying money owed to bankers.

She also cited a survey published Tuesday by the Datafolha polling firm that showed at least 60 percent of Brazilians opposed the spending cap bill.

Labor unions and social movements have called for rallies on Tuesday to protest the Senate vote, prompting authorities in Brasilia to bolster the police presence near the legislative palace.

 

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