Brazil’s Congress Votes to Fast-Track Fiscal Overhaul Proposal

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(Bloomberg) -- Brazil’s lower house of congress voted Wednesday to fast-track its consideration of the government’s new fiscal framework proposal, putting President Luiz Inacio Lula da Silva’s main legislative priority on an accelerated path to its potential approval.

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The fiscal proposal, which would replace Brazil’s so-called spending cap rule while seeking to shore up its public finances, is now expected to face a full vote in the lower house next Wednesday. It would then go to the Senate.

The fast-track measure passed with 367 votes, well above the majority threshold that will be necessary to approve the full bill in the 513-member chamber. During a congressional hearing earlier on Wednesday, Finance Minister Fernando Haddad said he expected the fiscal framework to ultimately win between 300 and 350 votes.

Haddad, who drafted the government’s original proposal, has sought to strike a delicate balance between investors who want the plan to demonstrate fiscal responsibility and Lula’s leftist allies, who are eager for larger investments into social programs.

“We are seeking to balance public budgets with social vision,” he said at the hearing.

The new fiscal framework proposed by Lula’s government includes small but growing primary budget surpluses, which don’t take into account interest payments, in order to stabilize public debt. It is part of the government’s efforts to assuage market concerns and help convince Brazil’s central bank to begin lowering interest rates that Lula considers an impediment to economic growth.

Read More: Brazil’s New Fiscal Proposal Becomes Stricter in Congress

On Tuesday, representative Claudio Cajado, the bill’s rapporteur, introduced changes in the text, including automatic penalties in case the administration fails to meet the plan’s fiscal goals.

The government would be forced to reduce spending if revenue comes in below its estimates, including delaying some payments, freezing the salary of public workers and halting the hiring of new ones.

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