(Bloomberg) — After three days of late night votes, Brazil’s congress inched closer to delivering weakened key provisions of a spending cut package meant to ease investor fears about the country’s deteriorating fiscal situation.
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Lawmakers of both chambers of congress Thursday voted in favor of a proposed constitutional amendment that forms part of the package, but made changes that could dent its impact on public accounts. Senators are expected on Friday to vote on another bill that’s set to be far weaker than the government-proposed version.
The moves follow the watering down of another piece of the austerity plan, which aims to cut 70 billion reais ($11.4 billion) in spending.
The Finance Ministry has yet to estimate the fiscal impact of the changes, but deepening market skepticism about the fiscal outlook had already driven the Brazilian real to record lows against the dollar earlier this week.
The proposed constitutional amendment will place caps on so-called super salaries for public workers, but with looser limits on loopholes that make it possible to exceed the current ceiling of 44,000 reais.
Senators are set to consider Friday a legislation containing changes to the so-called continuous payment benefit, a social program that provides aid to low-income and elderly Brazilians with disabilities. The rapporteur of that bill in the lower house said this week that he wanted to ensure that needy families are not left uncovered.
Thursday night senators approved a weaker version of a bill that prohibits the expansion of tax benefits if public finances are worsening, and limits increased spending for civil servants. The proposal also overturns a measure reinstating a vehicle tax and barred the government from blocking the use of public funds earmarked by legislators for local projects. It has already been approved by the lower house.
The fourth measure from the package, a bill to change the military pensions system, will be voted on in 2025, according to the government leader in the lower house, Jose Guimaraes.
Brazil is running an annual budget gap of 10% — far wider than the ones seen during the leftist President Luiz Inacio Lula da Silva’s first administration. The fiscal concerns have weighed on the real, which ranks among the world’s worst-performing major currencies this year.
The central bank has repeatedly intervened in currency markets in an effort to stem the slide. On Thursday alone it sold $8 billion in back-to-back spot auctions, its largest daily sale since at least 1999, according to central bank data compiled by Bloomberg.