Brazil's Congress studies 22% Minimum Wage Hike For 2002

By:  Unknown author
 The Wall Street Journal, December 7, 2001

Brazil's joint congressional budget committee is studying an increase in the country's minimum wage by up to 22% in 2002 amid threats from the opposition to obstruct budget voting unless the government supports the proposal.

The government projects that the wage hike to 220 reals ($1=BRR2.398) per month from BRR180 currently would cost it about BRR4.5 billion and would burden efforts to pursue a primary budget surplus target of 3.5% of gross domestic product agreed upon with the International Monetary Fund.

"We are going to propose a minimum wage adjustment to BRR220," said opposition Workers Party leader Walter Pinheiro. "If this isn't accepted, we will obstruct voting on the budget bill as we have been doing in committee on discretionary legislative spending."

Aside from the 22% increase, congress is also studying an alternative 11% wage hike to BRR200 per month. This proposal would cost the government approximately BRR2.5 billion.

A hike in the country's minimum wage increases spending from the public social security system, which uses the wage rate to calculate benefit payments.

In the government's 2002 budget proposal submitted to congress in September, it proposed an 5% minimum wage increase to BRR189 per month, well less than last year's hike to BRR180 per month from BRR151 per month.

Meanwhile, the government appears willing to soften its position ahead of the upcoming election year.

"We're going to go to a great effort to raise the minimum wage beyond BRR189," said budget committee chairman and governing coalition member Sampaio Doria late Thursday.

Aside from the minimum wage hike, Brazil's congress is also studying a personal income tax adjustment that could cost the government up to BRR3.5 billion.

Both the wage hike and the income tax adjustment must be approved this month to be included in the 2002 budget, which is scheduled for vote before the year's close.

Meanwhile, congress's budget committee Thursday approved BRR6 billion in 2002 federal spending beyond the government's proposed BRR33 billion. Going into budget talks this year, the country's lawmakers had proposed BRR38.4 billion in 2002 spending beyond the government's proposal.