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Belt-tightening in Brazil aimed at fighting economic crisis

Michel Temer, Henrique Meirelles

Brazil鈥檚 acting President Michel Temer, right, and his Finance Minister Henrique Meirelles attend a meeting on the economic measures with party leaders from the Lower House and Senate at Planalto presidential palace in Brasilia, Tuesday, May 24, 2016. Temer and Meirelles announced belt-tightening measures aimed at pulling Latin America鈥檚 largest economy from its worst crisis in decades, including taking back billions it loaned Brazil鈥檚 state-run investment bank, abolishing a fund created to channel oil revenues into education, sharply cutting public spending and negotiating reforms to the country鈥檚 pension system. Temer took over after President Dilma Rousseff was impeached earlier this month for allegedly using accounting tricks in managing the federal budget. AP

RIO DE JANEIRO 鈥 Brazil鈥檚 acting president announced austerity measures Tuesday aimed at pulling Latin America鈥檚 largest economy from its worst crisis in decades, warning that a failure to act will mean 鈥渆xtraordinary hardship鈥 for future generations.

Speaking with government leaders in a national televised meeting, interim President Michel Temer, 75, also banged his hand on the table while insisting he was up to the job.

Temer said the government would get an early repayment of about $28 billion from Brazil鈥檚 state-run investment bank BNDES and immediately abolish a fund created to channel oil revenues into education.

He also pledged to limit annual growth in government spending to the rate of inflation, currently around 10 percent.

The most aggressive belt-tightening plans will depend on the Congress, and especially the Senate. Senators must vote in the coming months on whether to return suspended President Dilma Rousseff to office after an impeachment trial or permanently remove her. The latter would let Temer stay in the presidency through 2018.

Temer, who was vice president, took over this month after Rousseff was impeached by the Senate for allegedly using accounting tricks in managing the federal budget. Rousseff has argued she did nothing wrong and promises to fight permanent removal at her upcoming trial.

READ: Acting president Temer vows to get Brazil 鈥榖ack on rails鈥

Temer was vague about a timeline for introducing legislation on his 鈥淣o. 1 priority鈥 of reforming Brazil鈥檚 pension system. Last week, he appointed a commission to study and negotiate changes. However, two of the country鈥檚 largest unions have refused to participate, saying they don鈥檛 recognize his government.

鈥淔urther down the road, we will sentence the Brazilian people to an extraordinary hardship if we don鈥檛 act,鈥 Temer said.

Brazil鈥檚 economy, an important engine for many South American nations, is expected to contract around 3 percent this year after a fall of almost 4 percent in 2015.

Temer faces huge challenges to getting reforms through Congress. While many lawmakers rallied around the idea of impeaching Rousseff, agreeing on thorny reforms will likely prove much more difficult.

In his first test with legislators, a divided Congress was still to vote on a new fiscal target for 2016, with a budget deficit of almost $48 billion. The previous figure under Rousseff was for a deficit of a little more than $27 billion. Lawmakers on both sides said there was a strong chance the vote would be postponed for next week.

鈥淚 have heard: 鈥楾emer is very frail, poor thing, he cannot govern. Nonsense!'鈥 said Temer, whose normal mild manner has earned him the nickname 鈥渂utler.鈥 鈥滻 was public security secretary twice in Sao Paulo and I had to deal with criminals. I know what to do in government.鈥

He said his administration has been a victim of 鈥減sychological aggression.鈥

As acting president for less than two weeks, Temer has come under mounting criticism on several fronts, from his decision to appoint a Cabinet of all white men to unpopular ideas floated by his finance minister, such as raising taxes.

Things got worse for the new administration Monday when Planning Minister Romero Juca took a leave of absence after a recording emerged in which Juca appears to be arguing that Rousseff had to be impeached to tamp down a sprawling investigation of a multibillion-dollar bribery and kickback scheme at state oil company Petrobras.

Since Temer took office, unions, artists, politicians and students have protested against him. An ally-turned-enemy of Rousseff鈥檚, he is not popular. Opinion polls say many Brazilians would like to see him impeached, too. And the last time he faced the ballot box on his own, in 2006, he received the least votes among the candidates who won seats in the Chamber of Deputies.

Also on Tuesday, Temer recreated the Culture Ministry after strong criticism from artists like Grammy Award winner Caetano Veloso and Oscar nominee Fernanda Montengro over his decision to fold the Culture Ministry into the Education Ministry.

Temer has his work cut out for him in convincing average Brazilians that he can turn things around.

The IBOPE institute on Tuesday published a poll saying only 31 percent of Brazilians reported being 鈥渙ptimistic鈥 or 鈥渧ery optimistic鈥 about Temer鈥檚 prospects, while 34 percent said they were 鈥減essimistic鈥 or 鈥渧ery pessimistic鈥 and 30 percent reported feeling indifferent. Five percent did not respond. The poll interviewed 2002 people between May 12 and May 16 and had a 2 percentage point margin of error.

READ: Brazil president faces impeachment over creative accounting

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