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UPDATE 1-Brazil tackling fiscal woes, on track for recovery -Meirelles

Oct 11/Reuters – The approval of a federal spending cap in a first-round vote shows Brazil is tackling its fiscal woes and is on its way to entering a sustainable growth path, Finance Minister Henrique Meirelles said on Tuesday.

Meirelles said the mere expectation of a budget reform has lifted confidence, but stressed that the spending cap and a pension reform must pass to have a lasting effect on growth.

An overwhelming majority in the lower house of Congress on Monday passed a proposal to cap public spending that is at the heart of President Michel Temer’s austerity plan.

“The economy is showing signs of recovery,” Meirelles told journalists in New York, where he is meeting with investors.

Meirelles added the budget reforms will improve Brazil’s credit rating, although not immediately. Brazil lost its investment grade rating by all leading agencies last year.

Asked about the impact of a potential rate hike in the United States, Meirelles said the reforms will help Brazil become less dependent on other economies. (Reporting by Christian Plumb; Writing by Silvio Cascione; Editing by Chizu Nomiyama and Andrea Ricci)

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