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Brazil seeks 20-year spending cap to cut national debt

Staff writer ▼ | June 16, 2016
Brazil's interim President Michel Temer proposed a constitutional amendment to limit public spending growth for up to 20 years.
Michel Temer
LatAm   Restoring investor confidence in Brazil
This is one of the most far-reaching fiscal reforms in decades designed to curb a runaway rise in public debt.

The government, including the legislative and judiciary branches, will be obliged to limit annual spending growth to the inflation rate of the prior year if the flagship reform is approved in Congress, according to a Finance Ministry statement.

The move signaled a victory for economic hardliners in the cabinet, led by Finance Minister Henrique Meirelles, who overcame calls from a faction pushing for a shorter cap.

Meirelles told a news conference a decisive move was necessary to restore investor confidence and the period would be long enough to have an impact on public debt levels.

"It is a great step forward, a change of concept," Meirelles said. "We are confident it will be approved."

Brazil posted a fiscal deficit of more than 10 percent of gross domestic product last year as its economy slid into the worst recession in decades. The rapid deterioration of public accounts has cost the country its coveted investment-grade credit ratings.