Elections over, Brazil tackles unpopular spending reforms

martes 4 de octubre de 2016 16:41 GYT

By Anthony Boadle and Maria Carolina Marcello

BRASILIA Oct 4 (Reuters) - Brazilian President Michel Temer's government introduced to Congress on Tuesday a landmark constitutional amendment to cap public spending, seeking to press ahead with unpopular reforms in the wake of last weekend's municipal elections.

Temer's new center-right government hopes the proposal, which would limit growth in spending to the rate of inflation for up to 20 years, will clear a Congressional committee this week and be put to a vote in the lower house by next week.

The amendment is designed to curb a budget deficit equivalent to 10 percent of gross domestic product last year. Hopes for its passage have made Brazilian assets among the best performing in the world this year despite an economy submerged in a two-year recession.

In a concession to ease its passage, the government announced on Monday that a cap on health and education expenditure would not go into effect until 2018, rather than next year.

Leftist opponents have demanded more time to debate a measure they say violates the spirit of Brazil's 1988 constitution, which made generous provisions for social spending. They plan to seek a court injunction to block the amendment.

Backers warn that Latin America's largest nation, which is wrestling with a sprawling corruption scandal, could follow Greece's path to financial meltdown if spending is not controlled. Temer said on Monday that public debt, which ended last year at a level equivalent to two-thirds of economic output, would reach 100 percent of GDP by 2024 without the measure.

"If this change is not adopted, fiscal collapse and the insolvency of public accounts are inevitable," lawmaker Darcisio Perondi said in his report to the committee studying the measure. "Brazil could repeat the tragedy of Greece."

Perondi said the previous government of Dilma Rousseff, who was removed from office in August for breaking budget laws, left an onerous legacy of overdrawn accounts, and he called on the lawmakers who impeached her to back the cap.   Continuación...