Pandemic Spending Pressure Puts Brazil Fiscal Rule at Risk

Brazil looks set to break a key fiscal rule to provide another round of financial aid to the poor as lawmakers pile pressure on President Jair Bolsonaro to act fast during a second wave of Covid-19, Bloomberg News reported. Economy Minister Paulo Guedes has tried to protect the so-called spending cap rule by proposing an emergency constitutional amendment that would allow the government to reduce mandatory spending in other areas -- a process that would require lengthy negotiations with congress. Legislators, meanwhile, are pushing to quickly resume the payments, which ran out in December, as the pandemic roars back. The pressure has made it likely the new aid will breach the rule investors see as a sign of the country’s commitment to fiscal austerity. There’s near consensus in congress about the need for a new round of financial aid to poor Brazilians during the pandemic, Senator Alessandro Vieira, a party leader and a lobbyist for more spending to mitigate the virus’ economic impact, said in an interview. He expects talks will speed up in coming days and the program will be approved in both houses by the end of March, with payments beginning in April. Read more.