September 11, 2017 / 3:40 PM / 2 years ago

UPDATE 2-Brazil plans pension vote in October, before tax reform

(Adds Finance Minister comments, adds BRASILIA dateline)

SAO PAULO/BRASILIA, Sept 11 (Reuters) - Brazil’s government intends to approve its proposed pension overhaul in the lower house of Congress in October, prioritizing it over a possible tax reform in the tight schedule ahead of the 2018 election year, ministers said on Monday.

The pension overhaul, considered vital by the government to avoid an eventual debt crisis, has been stuck in Congress since May, when President Michel Temer was accused of corruption by the billionaire owners of meatpacker JBS SA.

Monday’s remarks by Finance Minister Henrique Meirelles and Planning Minister Dyogo Oliveira nevertheless suggest policymakers are more confident about securing majority in Congress for unpopular measures given the widespread perception that Temer will not stand trial.

Legislators blocked a first set of corruption charges against Temer a month ago, and congress leaders have signaled they would not remove their support for the president if a new charge is presented this week, as expected.

The government has resumed talks about the proposed changes in the pension system in order to have it voted next month, Meirelles said on Twitter.

Economists say the pension overhaul is key to avoiding financial meltdown of the government, but unions oppose proposed benefit cuts and the creation of a minimum retirement age.

After approving the pension reform, the government would then seek to pass legislation to simplify the tax system, Meirelles added.

A broad tax reform may not be politically viable though, Planning Minister Dyogo Oliveira said at an event.

The government has not yet formally presented its tax proposal, which has also ranked among Temer’s priorities. Legislators have analyzed a separate bill, presented by Congressman Luiz Carlos Hauly.

Oliveira also said the government had asked state development bank BNDES to return 50 billion reais ($16.2 billion) to the Treasury this year and 130 billion reais in 2018.

BNDES, the world’s third-largest development bank, will change its business model to depend on market resources instead of scarce government funds, Oliveira added.

Oliveira repeated that the government was trying to unfreeze 8 billion to 10 billion reais in public spending after approving a looser budget target in Congress. He said the exact number had yet to be confirmed.

$1 = 3.0850 reais) (Reporting by Thaís Freitas in Sao Paulo and Silvio Cascione in Brasilia; Editing by Lisa Von Ahn and Marguerita Choy)

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