July 25, 2016 / 11:52 AM / 2 years ago

RPT-Brazil faces new taxes absent budget cap, finance minister says -paper

(Repeats to widen distribution)

RIO DE JANEIRO, July 25 (Reuters) - Brazil will face a prolonged period of rising taxes, high interest rates and stagnant growth if Congress fails to pass a cap on public spending, Finance Minister Henrique Meirelles told the Folha de S.Paulo newspaper in an interview published on Monday.

“If a cap on spending for health and education is not approved there will be no other exit, because in the coming years, to finance this increase in public spending, only tax increases are left,” Meirelles was quoted as saying.

He added that, absent the cap: “Brazil will have made a choice that I think is wrong, serious, to not control the evolution of its public debt and will pay a price for this in the coming years.”

“It’s a question of higher structural interest rates and the return of country risk,” he noted.

Spending that has grown an average of 6 percent a year above the country’s inflation rate since 1997 is unsustainable, Meirelles said in the interview.

Meirelles is committed to a government primary budget deficit of 170.5 billion reais ($52.4 billion) this year as the country’s deepest recession in decades crimps government revenue. The primary deficit is the excess of spending over revenue before interest payments on government debt.

Meirelles added that he does not believe he will have to raise taxes to cover spending in 2017, Folha reported.

$1 = 3.2567 Brazilian reais Reporting by Jeb Blount Editing by W Simon

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