June 2, 2016 / 4:26 PM / 2 years ago

UPDATE 1-Brazil recovery on track despite political turmoil - top Temer aide

(Adds comments on reforms, background)

By Anthony Boadle and Lisandra Paraguassu

BRASILIA, June 2 (Reuters) - Interim President Michel Temer’s efforts to bring Brazil out of its worst economic recession since the 1930s are going ahead as planned despite the loss of two ministers to a corruption scandal, his chief of staff said on Thursday.

Presidential chief of staff Eliseu Padilha said in an interview that the government enjoys a solid two-thirds majority in both chambers of Congress to push through legislation needed to plug the record deficit it inherited 20 days ago from suspended President Dilma Rousseff.

Padilha said the Temer government is very confident the Senate will vote to convict Rousseff for breaking budget laws in an impeachment trial, and it hopes this will happen as quickly as possible to remove any doubt about Temer’s legitimacy.

“The government will then have more political authority to act,” Padilha said. He hoped the vote could come as soon as the end of July, before Brazil’s holds the Olympic Games in August.

“I am not worried about the impeachment vote, but we have to work hard to make sure the economy starts to grow again, which appears to be the case,” Padilha said. The Temer plan to revive the economy includes a ceiling on public spending, a reduced role for the state and more room for private investment.

Latin America’s largest economy shrank for a fifth straight quarter in early 2016 as political turmoil and the sweeping corruption scandal centered on Petrobras weighed on activity. Gross domestic product fell 5.4 percent from a year earlier and unemployment has hit 11.2 percent.

Within the space of one week, Temer had to drop Planning Minister Romero Juca, a key figure in getting austerity measures approved by Congress, and the minister in charge of fighting corruption, Fabiano Silveira, after leaked recordings suggested they had tried to derail the Petrobras investigation.

Passage last week of the 2015 budget, authorizing an unprecedented deficit of 170 billion reais ($47.1 billion) this year, was a signal that Temer’s government does enjoy the majority it needs to push through austerity measures.

Brazil could balance its budget by 2018 without having to raise taxes, according to Padilha.

The biggest item weighing on government accounts is Brazil’s generous pension system, which Temer is committed to tackling.

Pension reform will be enacted before the end of the year, even though a proposal that is being drawn up with labor unions has been delayed for an additional 15 days, he said.

The sale of assets and greater involvement of the private sector in Brazil’s oil and gas industry will come soon once legislation is enacted reducing the role of Petroleo Brasileiro , as Petrobras is called, Padilha said.

Infrastructure concessions to private companies will focus on roads, airport and ports, with an auction of Belem ports set for next week, he said.

Brazil’s largest power utility Eletrobras will remain in state hands, Padilha said. He would not comment on the privatization of Eletrobras subsidiaries, but said the injection of government funds in the utility in an emergency is not out of the question.

Temer’s government has no objection, in principle, to opening up agricultural land ownership to foreign investors again, but there in no plan for this on the drawing board as yet, he said.

The new government also favors allowing foreign companies to hold a controlling stake in Brazilian airlines.

“Where the capital comes from does not matter, as long as the airline remains a Brazilian company,” Padilha said. (Editing by Alistair Bell)

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