Brazil Congress Upsets Levy Measures With Push to Boost Pensions

Brazil Congress Upsets Levy Measures With Push to Boost Pensions

By Raymond Colitt Arnaldo Galvao/Bloomberg

7:44 PM BRT
May 13, 2015

Joaquim Levy, finance minister of Brazil, speaks at the Bloomberg Americas Monetary Summit in New York, on April 20, 2015. Photographer: Michael Nagle/Bloomberg

Brazil’s lower house approved an amendment that raises benefits for pensioners, upsetting Finance Minister Joaquim Levy’s efforts to contain government spending.

Lawmakers on Wednesday evening voted 232 to 210 in favor of the amendment that raises federal spending on retirees. The approval came just hours after legislators approved the basic text of a broader bill designed to shore up fiscal accounts by limiting sick leave and pension payments to surviving relatives. The bill and amendment now go to the Senate.

“This was a surprise,” Rafael Cortez, a political analyst at Tendencias Consultoria, said by telephone about the amendment. “It doesn’t kill the broader bill, but creates another complication in terms of pension payments.”

Wednesday’s vote was the first major setback in Congress for Levy, who is banking on legislation that would raise taxes and cut spending to help avert a credit downgrade. The economist has spent the last several weeks lobbying lawmakers who are reluctant to approve belt-tightening measures amid expectations Brazil will sink into recession this year.

“We already knew this would be a difficult vote,” Jose Guimaraes, the government leader in the lower house, told reporters in Brasilia. “This amendment clearly harms the fiscal adjustment.”

Lawmakers on Thursday are scheduled to vote on an additional seven amendments to the pension bill. Also on Wednesday night, they passed another amendment that reduces the amount of savings the government had wanted to achieve by limiting sick pay.

Levy’s fiscal measures are designed to achieve a primary budget surplus equivalent to 1.2 percent of gross domestic product. The government last year ran a deficit before interest payments of 0.6 percent of GDP.