MercoPress. South Atlantic News Agency

Brazil votes 2012 budget limiting civil servants salaries and pension increases

Better for Brazil to ensure jobs and investments

The Brazilian Congress approved next year's budget bill, rejecting wage increases for pensioners and public servants in a bid to contain spending as volatility advances in international markets.

President Dilma Rousseff's coalition in Congress did not allow a proposed 7.7 billion Real (15.24 Billion US dollars) increase in salaries for judicial officials to be included in the legislation. Lawmakers also denied a 10 billion Real increase for pensioners who receive more than the country's minimum wage.

“The worsening of the international crisis sets a scenario of uncertainty and requires caution in the adoption of measures that expand permanent expenses” wrote Arlindo Chinaglia, a member of Rousseff's Workers' Party, in the final report of the bill. “It's better for Brazil to ensure investment and employment levels”.

Europe's deepening debt crisis has reduced demand for Brazil's exports. Brazil's economy, Latin America's largest, contracted for the first time in two years in the third quarter after policymakers raised borrowing costs earlier in the year and the European and US debt crises hurt confidence. GDP shrank 0.17% in the quarter on an annualized basis.

The bill, which still requires the president's signature to go into effect next year, forecasts an increase of 37.6% in public investments compared to this year's budget, or a rise of 79.7 billion Reais.

Rousseff said on December 16 that wage increases for public servants would weaken the country amid a “violent world crisis”. She has urged lawmakers to help the government limit public spending.

The 2012 budget bill targets a (primary) surplus before interest payments of 139.8 billion Reais for the federal, state and local governments, up from 127.9 billion Reais this year. By October, Brazil had accumulated a budget surplus before interest payments of 118.6 billion Reais.

According to the budget bill approved, net debt will fall to 36.5% of GDP in 2012, from 38.2% in October. Rousseff, who took office on January 1, has vowed to reduce Brazil's net debt to 30% of GDP by 2014.

The budget bill approved by Congress forecasts GDP growth of 4.5% next year. This is down from the 5% forecast by Rousseff's administration in the original proposal.

The latest private estimates for 2012 expansion range between 2.3% and 2.5%, while the Central bank forecasts economic growth of 3.5% in 2012.