Brazil Congress votes on fiscal package, changes could limit impact

8:51 pm Thursday, December 19th, 2024

BRASILIA/SAO PAULO (Reuters) -Brazil’s lower house and Senate were voting on Thursday evening on a government package of three proposals aimed at cutting spending, although some of the included changes are expected to ultimately scale back their fiscal impact.

President Luiz Inacio Lula da Silva’s administration has been racing to pass the package before Congress goes on holiday break next week.

By Thursday evening, the Senate had approved the first of the three proposals, which prohibits the granting or expansion of tax benefits if public accounts face a primary deficit.

That bill, which also imposes stricter controls on certain mechanisms that allow lawmakers to allocate public funds, will now head to Lula’s desk to be signed into law, having secured Congress’ full approval.

The lower house approved the fiscal package’s two other proposals with modifications, including a constitutional amendment, sending both to the Senate. Lawmakers’ changes to the amendment included a measure to ensure public-sector salaries comply with constitutional limits.

Under the government’s original proposal, payments exceeding those limits would be effectively halted once the amendment was approved, but the version passed says the prohibition would only take effect after the approval of subsequent legislation.

Another setback for Lula’s administration was a change in a proposal of the amendment related to public education funds, through which the government aimed to save money by releasing a part of the Education Ministry’s current budget.

In the bill, the lower house also eased stricter rules proposed by the government for a social benefit for the elderly and disabled, known as the BPC.

It was still unclear how much these changes could water down the original package’s savings, which the government estimated at more than 70 billion reais ($11.47 billion) over the next two years.

The fiscal package, announced by the government in late November, had already been poorly received by markets for being seen as too modest.

($1 = 6.1525 reais)

(Reporting by Maria Carolina Marcello, Marcela Ayres in Brasilia, and Andre Romani in Sao Paulo; Editing by Anthony Esposito and Leslie Adler)