Spending cap bill passes first-round senate vote in Brazil

Wednesday, November 30, 2016

The Brazilian government won a first-round vote in the senate to approve the bill for the constitutional amendment that the Michel Temer administration government wants to enact to bring in a public spending cap.

Against a backdrop of rubber bullets and teargas fired against some 10,000 anti-fiscal austerity protestors outside the congress building in capital Brasilia, some 61 senators voted in favor of the bill and 14 voted against it, according to local media. The second and final senate vote is expected to take place on December 13.

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Most of the demonstrators were reportedly students or members of unions, landless workers movements, organizations linked to federal universities and indigenous groups. Some 40 people were injured and federal police broke up the protests as demonstrators tried to break into the congress building. Several cars were set on fire and windows smashed in the violence.

Both voting rounds in the senate require a three-fifths majority in order to approve the bill, but the government's goal for Tuesday's vote was to have the support of 61-65 of its 81 senators.

According to Samar Maziad, a senior sovereign analyst at Moody's, the spending cap could have positive results for Brazil.

"The senate vote to limit overall government spending in real terms is a step in the right direction toward restoring fiscal balance," Maziad said in a statement. "If it is followed by additional fiscal reforms, including social security, we expect it will improve Brazil's credit profile."

During the session, senator Eunício Oliveira defended the bill and rejected the idea that it could lead to cuts in funds for education and healthcare, a claim which was repeated by many of the protestors in Brasilia. He insisted that the fiscal changes will increase minimum spending on healthcare in 2017 to 15% of current net revenues from the previous 13.7% and that spending on education will be maintained if the spending cap bill is passed.