MNI EXCLUSIVE:Brazil Money-Saving Admin Reform Delayed Till H2

     SAO PAULO(MNI) - The Brazilian government's hopes of putting a major reform

allowing it to slash its civil service wage bill to a parliamentary vote before

July are likely to be disappointed, three leaders of parties in the lower house

of Congress told MNI, saying a debate on the bill may not come before the second

half of the year as legislators prioritise an overhaul of the tax system.

     "The government does not seem to know what it wants. Parliament has taken

over this vacuum and is pursuing its own agenda," said Efraim Filho, lower house

leader of the right wing Democrats.

     While the government of President Jair Bolsonaro has provided no estimate

of savings from the reform, it hopes it will allow it to avoid filling most of

149,000 civil service jobs otherwise expected to become vacant by 2024 as

existing employees retire. Seeking to reduce its USD25 billion annual pay bill

for its 712,000 civil servants, any new hires would be taken on at

private-sector-level salaries - about 50% lower, according to the World Bank --

and kept on probation for three years before their positions are made permanent.

     But, despite the expressed ambition of Economy Minister Paulo Guedes of

getting the reform approved in the coming months, the government has still to

finish drawing it up. Nor has the government sent Congress its proposal for tax

reform, even though legislators are set to prioritise consideration of three

competing proposals already at different stages of the legislative process, and

which will now be debated by a bicameral committee.

     Two of these tax plans focus on simplifying a confusing mesh of levies,

proposing to merge five or seven separate taxes on consumption into a single

rate. While they have no immediate implications for revenues, these two

proposals, which the government sees positively, are meant to simplify business

for companies in Brazil, hopefully attracting more investment.

     The third proposal, which would cut taxes for the poorest and boost them

for the wealthiest, was presented by leftist parties in opposition to Bolsonaro

and party officials, including two in favour, told MNI it was unlikely to

prosper.

     --CONSTITUTIONAL CHANGE

     With legislators concentrating on taxes, the space for consideration of the

administrative reform will be considerably reduced. Both the administrative and

tax measures would require constitutional changes, requiring at least three

fifths support in each chamber. Filho and Alessandro Molon, of the Brazilian

Socialist Party, said it would be difficult to consider both bills at the same

time. Another lower house party leader, Andre Figueiredo of the leftist

Democratic Labour Party, said it might be possible, but only "with good will."

     Later in the year, municipal elections held from August to October might

also slow down Congress, with many parliamentarians taking time to campaign for

candidates.

     Irritated by the limited prospect for immediate progress for his

administrative reform, Guedes exchanged accusations with Rodrigo Maia, president

of the lower house Chamber of Deputies, at an event in Sao Paulo on Thursday.

Guedes said he was becoming used to politicians' slow tempo, while Maia pointed

out that Congress cannot process government proposals before the government

draws them up.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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