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Unpopular Austerity Measures May Be Brazil’s Best Path to Growth

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Austerity measures in Brazil could erode Dilma Rousseff's critical union support.

A proposed government austerity package may keep Brazil from a credit rating downgrade, but could cost President Dilma Rousseff some of her biggest supporters: the country’s labor unions.

Lawmakers in Brazil’s lower house passed a proposed bill this week that would limit thousands of workers’ access to social security benefits. The MP 665 bill was approved by a narrow 252-227 vote during a heated debate late Wednesday. 

Finance Minister Joaquim Levy called the legislative decision a “victory” and said it could potentially lower government spending by 18 billion reais ($5.9 billion) this year.

“It’s a victory for all of society,” Levy told journalists in Brasília on Thursday. “We will meet our objectives so that we can start an agenda that goes beyond the fiscal adjustment.”

Earlier this week, representatives from the Central Única dos Trabalhadores (Unified Workers’ Central—CUT) met with the ruling Partido dos Trabalhadores (Workers’ Party—PT) congressional leadership and said they were against the bill.

CUT is considered one of the largest unions in the country and one of the PT’s founding groups, and has been a strong supporter of Rousseff and former President Luiz Inácio Lula da Silva’s governments.

During the vote, members of another labor union (the Força Sindical , which has consistently been outspoken against the PT) threw “PTro dollars” from the viewing gallery onto the congressional floor.

The fake currency featured the portraits of Rousseff, Silva and former PT Treasurer João Vaccari—who was arrested last month in connection with the massive kickback investigation involving state-run oil company Petrobras.

The proposed austerity package could be Rousseff’s final Hail Mary move to keep the country afloat. The bill will next go to the Senate, where it is expected to face heavy opposition from Senate President Renan Calheiros, who said the proposal punishes workers.

In recent months, Brazil’s economy has suffered due to massive inflation and a depreciating national currency. Unemployment numbers also increased to 7.9 percent in the first quarter of 2015 (up from 6.5 percent in the last quarter of 2014).

Oil giant Petrobras recently opened its accounts, which revealed that the corruption scandal has cost the company 2.1 billion reais (about $658 million) in losses. The audit was conducted by PricewaterhouseCoopers and included data from 2004 to 2012.

The scandal has rocked Rousseff’s second presidential term. The latest popularity polls showed her approval at 13 percent, and calls for her resignation and impeachment have led to large protests in recent months.  Although Rousseff has not been directly implicated in the Petrobras scandal, Vaccari and other allies from the PT are under investigation.

A second austerity proposal is scheduled to be introduced to Congress in the coming days. If approved, MP 664 would require widowed spouses collecting pension to have been married to the deceased worker for at least two years (there is currently no prerequisite). 

“I think these steps will be essential in order to reach the necessary fiscal balance and for the economy and employment rates to grow once again,” Levy said.

*Flora Charner is an AQ contributing blogger and a multimedia journalist based in Rio de Janeiro and New York.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Brazil, Dilma Rousseff, Joaquim Levy, Brazilian Economy

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