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By Anthony Boadle
BRASILIA Nov 21 Brazilian President Michel
Temer warned on Monday that the national debt could swell to the
size of the country's gross domestic product within eight years
should public spending not be brought under control and fiscal
reforms not enacted.
Speaking to an advisory council of business leaders, Temer
vowed to send a proposal to Congress next month to reform the
pension system once lawmakers pass a spending cap. He asked the
council to back the cap to revive confidence in the economy.
A 20-year-long ceiling on federal spending cap should pass
Congress without changes in a few weeks, he added. The measure
has cleared the lower house and is expected to win approval by
the Senate by Dec. 13.
"The nature of Brazil's crisis is fiscal. For too long,
governments have spent more than they earned," said Temer, who
replaced leftist Dilma Rousseff, who was impeached and ousted
earlier this year from breaching budgetary laws.
In consolidated terms, the budget deficit is expected to
close 2016 at around 10 percent of GDP for a second year, and
the public sector debt currently stands at 71 percent of GDP.
It is expected to balloon to about 80 percent of GDP in a
few years and could exceed 100 percent of GDP if spending is not
curbed, Finance Minister Henrique Meirelles told the council.
Consolidated public sector data encompasses the pension
system, the central bank as well as federal, state and municipal
Temer's pension reform plan is expected to face fierce
opposition from leftist parties and labor unions when it is
debated in Congress next year. Most state governments in Brazil
are "practically bankrupt" due to a heavy pension burden, Temer
Billionaire Abilio Diniz urged Temer to accelerate plans to
proceed with auctions to build and operate infrastructure
projects and licenses, so foreign investment would flow back to
Diniz, the chairman of BRF Brasil Foods SA, the
world's largest poultry exporter, said Brazilian companies and
households are steeped in debt.
Brazil's economy has shrunk 10 percent in two years of
recession, incomes have suffered and weak consumer demand has
delayed recovery, according to Luiz Carlos Trabuco, chief
executive officer of Banco Bradesco, Brazil's No. 2
The so-called Economic and Social Development Council, which
convened to advise Temer, includes top businessmen. Among them
are Jorge Paulo Lemann, Brazil's richest person with a fortune
estimated at around $28 billion, and Roberto Setubal, the
outgoing CEO of Itaú Unibanco Holding SA, the
nation's largest bank by market value.
(Reporting by Anthony Boadle; Additional reporting by Silvio
Cascione and Alonso Soto in Brasilia; Editing by Daniel Flynn,
Guillermo Parra-Bernal and W Simon)