Brazil’s Congress passes invoice to boost spending cap for welfare program By Reuters

By Maria Carolina Marcello

BRASILIA (Reuters) -Brazil’s Congress late on Wednesday gave its ultimate approval to a constitutional modification rising the federal government spending cap to take care of welfare payouts to poor households subsequent yr, a centerpiece marketing campaign pledge by the nation’s incoming president.

The inexperienced mild represents a serious victory for leftist President-elect Luiz Inacio Lula da Silva, overcoming a primary problem forward of his Jan. 1 inauguration regardless of market jitters over his plans to spice up spending.

The invoice backed by Lula’s transition crew is about to boost Brazil’s spending ceiling by 145 billion reais ($28 billion) for one yr to fund month-to-month funds of 600 reais beneath the “Bolsa Familia” welfare program.

It would additionally permit an additional fee for households with kids as much as six years outdated and exclude a further 23 billion reais of windfall income on public funding from the spending cap.

The decrease home of Congress on Wednesday voted 331 towards 163 to move the invoice, which then headed to Senate, the place lawmakers accredited it in a 63-11 vote.

The modification will “guarantee help to these most in want,” Senate President Rodrigo Pacheco stated after the vote, including that Congress was guided by “what is prime for the nation.”

Markets initially had a damaging response to the upper spending proposal, however cooled down after Congress members agreed to chop the life span of the invoice to just one yr from a beforehand deliberate two-year interval.

Lula’s crew had initially proposed waiving 175 billion reais in welfare funding from the spending cap for every of the 4 years of his time period, however the Senate had already scaled this again earlier this month.

“Our crew seen the change as constructive, however famous that the fiscal affect was nonetheless fairly excessive,” dealer XP (NASDAQ:) Investimentos stated in a analysis notice.

Brazil’s benchmark inventory index closed up 0.53% on Wednesday, its third constructive session in a row, whereas the Brazilian actual, was roughly flat.

Incoming Finance Minister Fernando Haddad informed reporters that the snug victory within the decrease home served as an excellent check of the longer term authorities’s political help in Congress.

He additionally stated he supposed to ship to Congress a brand new fiscal framework to switch the present spending cap within the first half of 2023. Based on the longer term minister, as soon as accredited, the brand new algorithm would assist manage public funds.