Brazil Senate OKs easing budget cap to fund welfare program

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BRASILIA, Dec 2 (Reuters) - Brazil's Senate passed a constitutional amendment on Thursday that will ease the government's spending cap and stagger some obligations, allowing far-right President Jair Bolsonaro to ramp up welfare spending ahead of next year's elections.

The amendment, resisted at first by opposition parties, gives the government room to spend an additional 106.1 billion reais ($18.7 billion) in 2022 without breaking the constitutional spending cap.

The bill was approved in two rounds of voting and sent back to the lower house for final passage as it was altered in the Senate.

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It allows Bolsonaro to fund a new welfare program called Auxilio Brasil that will provide monthly payments of 400 reais ($71) to 17 million poor families, replacing the long-running Bolsa Familia program begun by leftist former President Luiz Inacio Lula da Silva.

The Senate later approved a separate measure creating Auxilio Brasil, which will cost the government some 85 billion reais a year, according to its sponsor Congressman Marcelo Aro.

Opposition parties had opposed the amendment, accusing Bolsonaro of boosting social spending to bolster his re-election chances in October. But opposition senators backed a modified bill, saying it provided vital relief for Brazil's poor who have been hard-hit since last year by the coronavirus pandemic.

Bolsonaro is expected to face Lula in the election next October, although neither has officially declared his candidacy.

Opinion polls show Lula has a comfortable lead at the moment.

Bolsonaro's popularity has plummeted since he took office in 2019 due to his slow response to the pandemic that has killed more than 600,000 Brazilians, the deadliest toll outside the United States.

The pandemic has caused record unemployment and rising inflation that along with a severe drought and high interest rates have triggered recession in Latin America's largest economy. read more

($1 = 5.65 reais)

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Reporting by Anthony Boadle and Maria Carolina Marcello; Editing by Richard Chang

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