Posts Tagged ‘Speaker Rodrigo Maia’

Brazil President Weakened by Graft Charge, Losing Fiscal Battle

August 12, 2017

Aug. 11, 2017, at 3:29 p.m.

Reuters

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Brazil’s President Michel Temer reacts during a ceremony in Sao Paulo, Brazil August 8, 2017. REUTERS/Leonardo Benassatto REUTERS

By Anthony Boadle

BRASILIA (Reuters) – Brazilian President Michel Temer has burned through political capital fighting corruption charges and is struggling to push forward his economic agenda meant to rein in a gaping budget deficit.

Even allies in Congress now doubt he can achieve anything but watered-down measures, likely delaying any fix to Brazil’s fiscal crisis until the economy recovers from deep recession.

With continued deficits, Brazil risks further downgrades in its credit rating. It lost its investment grade two years ago, adding to the cost of financing mounting public debt.

In a sign of Temer’s failure to restore fiscal health, the government is expected to revise upward its 2017 and 2018 deficit targets on Monday due to falling tax revenues in an economy that is barely growing.

More pessimistic analysts worry the insolvency already faced by some Brazilian states that cannot pay employees or provide basic services will reach the federal government.

Temer had a window to pass a pension overhaul earlier this year, but it closed in May when allegations emerged that he condoned bribes in a taped conversation with the then CEO of the world’s largest meatpacker JBS S.A..”We are dancing samba at the edge of the precipice,” said Sao Paulo-based wealth manager Fabio Knijnik. “I don’t see the political class at all concerned with resolving this.”

The deeply unpopular president won enough backing in Congress on Aug. 2 to block a corruption charge that could have led to his suspension pending trial by the Supreme Court. To survive, he approved about $1.5 billion in pork barrel spending to keep lawmakers happy.

His closest ally in Congress, the center-right Democrats Party of Speaker Rodrigo Maia, does not believe Temer has the 308 votes, or three-fifths of the lower chamber, needed to pass pension reform, the key measure in his fiscal rescue plan.

Speaking in Rio on Friday, Maia said Temer’s political troubles and lower-than-expected tax revenues had created the crisis. He said Brazil had no alternative but to seek whatever pension fix it could, given Congress would not raise taxes.

Congressman Efraim Filho, the Democrats whip, told Reuters Temer must dilute the pension bill to get it past Congress. He said the measure had to be stripped down to its most important provision, a minimum age for retirement of 65 years for men and 63 for women in a country where people only work on average until age 54.

CRUMBLING COALITION

Temer’s government coalition is in disarray. Parties who stood by the president are now demanding they be rewarded with cabinet positions, such as the big-budget Cities Ministry. It is now controlled by the Brazilian Social Democracy Party (PSDB), which split over whether to abandon the scandal-plagued president.

Until they get their way, the allies at the core of his coalition have said they will not put his proposed pension bill to the vote. Maia said the “climate” was not right to move to a floor vote and the bill could languish and miss a legislative window likely to close in December as an election year approaches in 2018.

The government has already made concessions on the pension bill provisions that will reduce planned fiscal savings by up to 25 percent in 10 years and nearly 30 percent in 30 years, according to Finance Minister Henrique Meirelles.

The pension overhaul is vital for Brazil to comply with a 20-year spending cap that was Temer’s first move to restore fiscal discipline, albeit without a full impact on accounts until 2019.

“That ceiling was like saying you are going on a diet two years from now,” said Daniel Freifeld of Callaway Capital, a Washington D.C.-based investment firm.

(Reporting by Anthony Boadle; Editing by Andrew Hay)

Brazil Eyes Pension Vote, Budget Target After Temer Dodges Trial

August 3, 2017

BRASILIA — Brazil’s Congress is expected to reopen the door for a modest pension overhaul as soon as October, lawmakers said before returning to normal business on Thursday following a vote to block a corruption trial against President Michel Temer.

Still, legislators warned that Temer must spend some of his newfound political capital either on measures raising tax revenue or a new, less ambitious 2017 budget target. The choice could quickly put him at odds with allies and even erode market confidence in his austerity agenda.

President Michel Temer of Brazil in Brasília — Congress voted NO for a corruption trial.  Credit Eraldo Peres/Associated Press

Since May, uncertainty over whether Temer would be suspended from office and tried by the Supreme Court had paralysed talks on a proposed pension reform, the cornerstone of the president’s plan to eventual close Brazil’s gaping budget deficit.

The government, emboldened by a 263-227 vote to block the charges on Wednesday, now wants to resume talks with legislators by early next week, gauging support for the proposal, a government source told Reuters, requesting anonymity to freely discuss the government’s strategy.

Speaker Rodrigo Maia wants the lower house to vote on the reform by the end of August, he said earlier this week, which means the proposal could be approved by the Senate as soon as October, according to a second government source.

The government will not draw red lines in the negotiation, the first source added, in the hopes that lawmakers will agree to approve a meaningful overhaul now instead of resorting to piecemeal changes over the next few years.

Some remain sceptical that even a watered-down pension bill can pass, saying the window of opportunity for a pension reform may have closed ahead of next year’s general elections.

The risk of prosecutors pressing new charges against Temer could also darken the outlook.

Prosecutor General Rodrigo Janot charged Temer last month with taking bribes from meatpacker JBS SA which the president denies. Congress voted on Wednesday to block those charges from proceeding to the Supreme Court, but Janot may still bring additional charges in the case.

Wary of opening battles on several fronts, Temer is unlikely to move immediately on a plan to simplify the tax system.

The government prefers to wait a few weeks to test support for pension reform before deciding its strategy on tax reform, the second government source told Reuters.

Temer’s minister in charge of relations with Congress, Antonio Imbassahy, acknowledged that the pension reform faces a more challenging outlook than the tax overhaul, but said Temer would seek to approve both.

FISCAL WOES

The government will also need a quick answer to growing questions about missing its annual budget target.

So far Temer has raised fuel taxes, frozen spending and stepped up asset sales to avoid changing the target – a decision that investors could read as a sign of weaker fiscal discipline.

This week Finance Minister Henrique Meirelles reiterated the government’s commitment to a 2017 fiscal deficit of 139 billion reais before interest payments.

The so-called primary deficit in the 12 months through June, however, rose to 167.2 billion reais, equivalent to 2.62 percent of gross domestic product and well above the official target.

Changing the target is a last-resort measure that could be announced later this month, the second government source told Reuters, adding that a new target would still not exceed last year’s 161 billion reais deficit.

More tax increases could face stiff resistance in Congress.

“It will not be prudent to change the target,” said Marcos Montes, whip of the government-allied Social Democratic Party (PSD) in the lower house. “But I don’t think society would stand even higher taxes. The government will have to cut even deeper.”

(Reporting by Silvio Cascione; Additional reporting by Ricardo Brito and Maria Carolina Marcello; Editing by Lisa Shumaker)