[I was reading this article and literally feel asleep, it was so much like a hundred other articles I've read. Then a few hours later I started reading in the same place and suddenly realized the minimum wage they are talking about here -- in Brazil, one of the biggest, most powerful and most successful countries in the third world -- is $3 a day. And they are literally moaning that it might be raised (by 12 cents in real terms) -- but expressing hope that thankfully those gains will probably be clawed back somewhere else.]
Financial Times; Dec 13, 2001
THE AMERICAS: Brazil Congress moves likely to hit budget PRE-ELECTION SPENDING MINIMUM WAGE AND TAX EXEMPTION PLANS:
By RAYMOND COLITT
Brazil's Congress was yesterday set to raise the national minimum wage and grant individual income tax exemptions in a pre-election spending spree that would force tough budgetary restraints on the government.
The move indicates the administration's eroding support in Congress, even within parties of the governing alliance, ahead of next October's general election. "Without a doubt the government faces increasing difficulties (in Congress)," Sampaio Doria, spokesman for the budget committee of the governing social democratic PSDB party, told O Globo television. "From now on public opinion will be the biggest influence on Congress," he said.
Congressional leaders reached an accord to raise the minimum monthly wage by 11 per cent to RDollars 200 (Pounds 58) from the government's original proposal of RDollars 189. Increasing it by less than inflation - estimated at 7 per cent this year - would have meant too big a political cost, they said. The rise would be partially compensated for by a RDollars 1.5bn cut in legislators' discretionary budget allowances.
The lower house was also set to vote yesterday in favour of a 27.5 per cent adjustment of income tax exemptions in compensation for inflation and salary rises over the past six years. This would decrease taxable income and create an estimated revenue shortfall of RDollars 2.6bn.
"Congress already did what it can. The executive now will have to find a way to compensate (the loss)," said Aecio Neves, president of the lower house.
The government yesterday launched last-minute efforts to sway legislators to vote against the bill and threatened to veto it. The Senate could vote on the proposal as early as next week.
Most economists agree the government will be able to reach its primary budget surplus agreed with the IMF for next year. Yet the necessary cuts in expenditure would cut into important social and infrastructure projects and "may not be sustainable", in the long run, said Roberto Padovani, partner in Tendencias, an economic consultancy.
One of the principal concerns weighing on Brazil's sovereign risk rating is the fear that the next administration which takes office in January 2003 may ease fiscal discipline.
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