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Brazil: Congress urged to pass austerity, reforms
October 25, 2016, 7:20 am

Temer, center, and Meirelles say their goal is to lower public spending and the primary deficit [Xinhua]

Temer, center, and Meirelles say their goal is to lower public spending and the primary deficit [Xinhua]

A leading Brazilian politician is urging Congress to quickly pass pivotal austerity measures and fiscal reforms to avoid a financial disaster in the country.

President Michel Temer has made the reforms a cornerstone of his administration and pledged to work diligently to see that they are passed through Congress.

There is a fear that they may be stalled, as they have done for over a year, as legislators argue about how harsh the austerity measures are on the public.

In late August, Temer announced a $17-billion austerity package comprised of tax increases and spending cuts.

Austerity measures were unpopular even during President Dilma Roussef’s administration because they greatly affect working class families.

One such measure proposed by the Temer administration is to delay public servants’ salary increases – a bold, if not tough act given Brazil’s very high inflation and unemployment rates.

It will be a hard sell for Temer to push through Congress his fiscal reforms and austerity packages.

One such bitterly opposed reform is to lower pensions, a measure that is likely to reignite street protests from teachers, police and public staff workers.

Speaker of the Lower House Rodrigo Maia is fearful that failure to pass all these measures could spell doom for efforts to rejuvenate the Brazilian economy.

“It’s not a joke what’s happening in Brazil,” Maia told the Financial Post.

“The crisis is real. It’s already hit the majority of municipalities, the majority of states, and if these reforms aren’t approved it will hit the federal government too.”

Brazil is facing the worst economic crisis since the post-World War II era. It has seen its fortunes plummet from positive GDP growth to contraction and recession in the past two years.

The warning from Maia comes on the heels of economic activity plummeting in August, according to the IBC-BR index.

The Central Bank’s IBC-BR which measures economic activity in Brazil’s farming, industry and services sectors, contracted 0.91 per cent in August.

In July, the figure was adjusted from a fall of 0.09 per cent to a fall of 0.18 per cent.

The disappointing data points to a persistent recession that requires more aggressive fiscal reforms.

The August drop is worse than expected and marks the biggest decline in 18 months.

Brazil’s official IBGE statistics provider attributed the decline in economic activity to a significant drop in retail sales, industrial output and services activity in August.

Read more: 2017 – Brazil’s make or break year

The BRICS Post with inputs from Agencies