Brazil's Temer Readying Economic Agenda for After Graft Vote

(Bloomberg) -- Brazilian President Michel Temer is preparing priority economic measures he wants to push after the lower house decides this week whether he should stand trial for corruption charges, a vote he hopes to win.

Proposals include increasing social security taxes for civil servants, phasing out payroll tax breaks for several industries, approving an installment plan for state social security debts, and defining the conditions for rebated repayment of overdue taxes, according to presidential aides, members of the economic team, and legislators.

“Once we overcome this accusation, we need to pursue the agenda the country needs,” said Luiz Felipe Baleia Rossi, head of Temer’s PMDB party in the lower house. “These measures are urgent.”

Temer is eager to turn the page after corruption allegations that surfaced in May stole the spotlight away from his economic reform agenda and shook investor confidence in his leadership. While his main goal is still to push a constitutional amendment to curb pension outlays, the immediate measures would boost his chances of meeting this year’s challenging budget target.

The government is considering widening the budget deficit before interest payments by as much as 20 billion reais ($6.4 billion) from 139 billion reais this year, a person on Temer’s economic team said on Tuesday, requesting not to be named. Finance Minister Henrique Meirelles was meeting with congressional leaders early in the day to discuss the economic agenda.

A combination of a lackluster recovery from back-to-back years of recession and overestimated one-off revenues have made this year’s budget target hard to meet.

Even if Temer manages to rebuild his coalition in the wake of the corruption scandal, it will be an uphill battle for him to make progress on two other planned reforms before his term runs out in December 2018. One is to simplify Brazil’s unwieldy tax system, the other to regulate campaign financing and impose hurdles for minuscule parties to enter Congress.

To contact the reporters on this story: Simone Iglesias in Brasília at spiglesias@bloomberg.net, Rachel Gamarski in Brasilia at rgamarski@bloomberg.net, Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net.

To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Daniela Milanese at dmilanese@bloomberg.net, Matthew Malinowski, Walter Brandimarte