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

. Last Updated: 07/27/2016

Brazil Senate Passes Key Austerity Bill

BRASILIA, Brazil -- With investors the world over watching nervously to see if Brazil can keep its economy on track following a nearly 25 percent currency devaluation, Brazil's Congress turned in a mixed performance.

Boosting Brazil's ailing economy, the Senate voted 64-12 Tuesday to approve a financial transactions tax that is expected to yield $9.6 billion a year for depleted government coffers. The bill must now go to the other house of Congress, the Chamber of Deputies, for two votes.

However, a more controversial measure on cutting pensions, which government allies in the Chamber had hoped to vote Wednesday, was put off for at least another day.

The Chamber was to decide Wednesday when to vote on the measure, which would raise about $2.6 billion a year by slashing civil servants' pensions by as much as 25 percent.

"I think the government allies in Congress are running scared, they would like to take credit for anything nice, but don't want to be blamed for anything bad," said David Fleischer, a professor of political science at the University of Brasilia.

Brazil roiled world markets Jan. 13 when it attempted a limited devaluation of its currency, the real. But two days later, markets rallied after Brazil stopped using its foreign reserves to buy up reals.

All told, the real has lost 24 percent of its value.

Since keeping its currency strong against the dollar was the cornerstone of Brazil's economic stabilization plan, it must now rely on Congress to implement austerity measures aimed at about $17.9 billion in 1999 if it is to keep the economy from spiraling out of control.

Silvio Camargo, head of international institutional equity sales for Banco Fator in S?o Paulo, said the pension-cutting vote is essential to show investors Brazil is back on track.

"It looks like the government has enough support to pass it, but any setbacks would increase turbulence a lot," he said, adding that Congress' failure to pass a similar bill in December was largely responsible for the current crisis.

However, about 120 federal deputies in the 513-seat Chamber receive pensions and would be voting themselves a 25 percent cut.

Variations on the measure have already been voted down four times and the government probably accepted the postponement fearing that failure to pass it could have terrible repercussions.

The global financial crisis hit Brazil in August, when investors withdrew their money for fearthe government couldn't cover a $65 billion budget deficit and might default on its loans.