MNI SOURCES: Months Of Delay Seen For Brazil Cost-Saving Law

     BRASILIA(MNI) - Congressional approval of a key reform aimed at making it

easier for Brazilian authorities to slash spending when budgets are under strain

will be delayed until at least March due to resistance from civil servants and a

political furore over President Jair Bolsonaro's decision to leave his former

political party to set up a new movement, three senior government officials told

MNI.

     Economy Minister Paulo Guedes sent three proposed constitutional amendments

to Congress on Nov. 5, including a measure, aimed at safeguarding funds for

public investment, allowing administrations throughout Brazil experiencing

budgetary problems to impose temporary bans on the promotion and hiring of civil

servants, as well as to cut employees' working hours by up to 25%.

     The government had hoped for this to be approved by the end of this year,

saving $7 billion and potentially substantially reducing next year's fiscal

deficit, which is set to come in at $ 19.1 billion.

     But voting on the issue now looks set to be delayed until March or April,

the officials told MNI, given the turmoil unleashed by Bolsonaro's departure

from the Social Liberal Party to form the right-wing Alliance for Brazil. At

least 25 of the 53 Social Liberal deputies, until now loyal to Bolsonaro, have

declined to follow him to the new party.

     "Today, the Bolsonaro government has no control over the congressional

agenda. Only what the Congress wants is approved in Brazil," said political

scientist Carlos Ranulfo Felix de Melo, a professor at the Federal University of

Minas Gerais.

     --FEDERATIVE PACT

     The other two constitutional amendments already sent to Congress include

the so-called "Federative Pact", which would adjust the constitutional rules on

how federal, state and municipal revenues are distributed and spent, and a

measure to close some of Brazil's 281 official funds, used for purposes ranging

from cultural productions to vocational education, and divert the money to

repaying public debt. The government hopes the Federative Pact will be approved

by the end of 2020, and for the other measure to be law by next June.

     Pressure from organisations representing civil servants has also led

Bolsonaro to hold back from sending another major reform, aimed at reducing

civil servants' earnings to public sector levels, which would make it easier to

dismiss under-performing state sector workers.

     The government fears that pushing ahead with a crackdown on civil servants'

pay might spark protests similar to those seen recently against Chile's

right-leaning government, and has not set a date for when it might do so.

     "We do not want what has been happening in Chile to happen in Brazil," said

one official with access to Bolsonaro.

     Only 13 legislative sessions remain this year, and Congress will be closed

from Dec. 22-Feb. 2.

     Instead of considering Guedes' reforms, Congress now looks set to spend the

rest of the year on other matters, including a proposal to make it easier to

jail defendants in criminal trials.

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

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