Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Brazil Crisis Package Is Sent to Parliament




BRASILIA, Brazil -- Brazilian President Fernando Henrique Cardoso, on the eve of Wednesday's test of his new austerity plan, urged an unruly Congress to back his reforms and save Latin America's powerhouse economy from crisis.


"To reduce interest rates, we must have the reforms. That is the crux of the issue," Cardoso told reporters after announcing moves to tackle near-record unemployment levels that are expected to rise soon.


"To reduce the [budget] deficit we must adopt the measures that are in Congress. ... It is an illusion to think that the president can sort this out on a whim," he said.


The lower house of Brazil's parliament was due to vote Wednesday on the final three amendments to a social security reform bill that has been bogged down in Congress for more than three years.


Anxious investors will be watching the outcome closely to gauge Cardoso's chances of clinching approval for the rest of a fiscal program announced last week to prevent Brazil from collapse amid global financial turmoil.


Cardoso must recover the faith of financial markets quickly to cut emergency interest rates of more than 40 percent which are strangling the economy and adding to the already punishing cost of servicing public debt.


The vote will also be monitored by the International Monetary Fund, which is putting together a multibillion-dollar credit line for Brazil and is expected to want belt-tightening in return.


"This is the first step toward fiscal reform," said a government spokeswoman in Congress. "If it doesn't work out, then taking a second step will be hard."


Parliament must vote on an array of other unpopular measures, including tax increases and a bill to cut civil service jobs included in the austerity plan. Another proposal to reduce public sector pensions was rejected on a previous occasion by the lower house, where a civil service lobby is very powerful.


Government officials prepared for Wednesday's vote by sending telegrams to the members of the 16 different parties represented in the lower house.


They also checked lawmakers' travel plans to make sure they would be in Brasilia, the capital, in time.


Some 216 members of the 513-strong lower house failed to win a new term in elections last month, and it was unclear if they would give Cardoso the support he desperately needs.


Finance Minister Pedro Malan told an audience of lawmakers they could help Brazil avoid deep recession next year.


"We believe we have every possibility of recovering the direction of Brazilian economic growth starting in 1999, principally if we do what has to be done," Malan said.


The social security reform bill seeks to stem a combined deficit in the private and public pension systems, set grow above $35 billion this year. That is more money than the federal budgets for education and health, combined.


Despite the bill's importance, Cardoso has struggled to get it and other reforms approved since taking office in 1995.


To approve the reforms, and to defeat opposition amendments, the government needs three-fifths majorities in both houses, a task which has frustrated Cardoso on several occasions.


One of the amendments due to be voted on Wednesday aims to cripple the bill by striking down the introduction of minimum retirement ages of 53 for men and 48 for women already in the workplace.


A clause introducing higher retirement ages for new workers was defeated earlier this year.