News Brief
Damaged by a two-year recession, corruption scandals and protests at home, Latin America’s largest economy turned to constitutional reforms to control its rising debt and spending.
Brazil’s Senate voted 53-16 in favor of a 20-year cap on spending increases for social welfare programs. The House has already passed the bill, which becomes law.
The constitutional amendment, PEC 55, will cap government spending on health care, education and social security through 2036 at current rates adjusted for inflation.
Supporters said it will create certainty in fiscal budgets, control rising debt, and attract foreign investment. They said the amendment also guarantees a floor for the spending programs.
Opponents, however, said the spending caps would hurt the poorest and lock future generations into the decision. Protesters held demonstrations — some turning violent — in Brasília, Rio, São Paulo and 14 other cities.
(Photo by Fabio Rodrigues Pozzebom/Agência Brasil)
The changes are part of a reform agenda sponsored by President Michel Temer, who took office after the impeachment of President Rousseff last August.
According to an IMF statement in November, “Markets have responded positively to the new government’s reform agenda, bolstering asset prices and confidence and helping the country ride a positive wave of sentiment toward emerging economies.”
Brazil is experiencing the “deepest recession in eight decades,” the IMF says. Brazil’s GDP contracted 3.8 percent in 2015 and is expected to contract by 3.3 percent this year, according to the IMF. Annual inflation, meanwhile, is about 8.75 percent while unemployment hovers around 11 percent.
Economists predict improvements next year but add that any recovery will be modest and fragile.
Additional Sources:
Reuters. Dec. 16, 2016
OxResearch Daily Brief Service. Country Report. Sept. 5, 2016
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