BRASILIA Oct 4 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
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
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
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
"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.
The conclusion of municipal elections in most cities across
Brazil last weekend allows Temer's ruling Brazilian Democratic
Movement Party (PMDB) and its coalition allies a freer hand to
back the measure. A small number of cities face a second-round
runoff this month.
But resistance from Rousseff's Workers Party and its allies,
as well as division within Temer's own coalition, point to a
difficult path for a proposal that requires two approvals in
each chamber of Congress by a three-fifths majority.
"We will seek an injunction because this violates the
Constitution and the right of five future governments to decide
their economic policies," said opposition leader Jandira Feghali
of the Communist Party of Brazil.
Temer, 75, who was sworn in to serve the remainder of
Rousseff's term through 2018, had vowed to put Brazil back on
its tracks and investors like his promises of fiscal discipline.
But a poll published on Tuesday showed Temer has failed to
convince Brazilians that his government is any better than
Rousseff's. The survey by pollster Ibope showed
that Temer's approval ratings remain low and some 68 percent of
Brazilians do not trust him.
The lower House is also expected to vote on Tuesday on a
bill that changes the rules for the exploration of Brazil's vast
offshore oil reserves in the costly subsalt layer, aimed at
boosting private investment in the oil industry.
The proposal removes the obligation for scandal-plagued,
debt-ridden state oil company Petrobras to be the
only operator of these oil fields and have a minimum 30 percent
stake in their development.
(Writing by Anthony Boadle; Editing by Leslie Adler)