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Bolsonaro Weighs Compromise on Brazilian Public-Sector Pay

Brazil’s President is walking a tightrope between making good on an austerity promise and maintaining support of public servants

Bolsonaro Weighs Compromise on Brazilian Public-Sector Pay
Jair Bolsonaro, Brazil’s president, front center, wears a protective mask alongside ministers during the National Flag Raising ceremony at Alvorada Palace in Brasilia, Brazil. (Photographer: Andre Borges/Bloomberg)

(Bloomberg) -- Brazil’s President Jair Bolsonaro is weighing compromise proposals on public-sector pay aimed at keeping his Economy Minister Paulo Guedes on board without alienating a key voter base.

Temporary salary freezes were the one condition imposed by Guedes’ economic team in return for granting 125 billion reais ($21 billion) in aid to states and municipalities during the coronavirus crisis. However, a bill approved by Congress excluded some public-sector staff such as teachers and health workers from the pay freeze -- prompting the president to pledge last week to partly veto the legislation.

Bolsonaro Weighs Compromise on Brazilian Public-Sector Pay

Faced with a dilemma, Bolsonaro is considering vetoing the exceptions to the rule while allowing for pay increases based on seniority that would benefit most public workers, said two people with knowledge of the matter. The president is also considering sending a new bill to Congress that would allow police forces -- a key part of his support base -- to get pay raises, the people said, asking not to be named because the discussions are private.

“We won’t have enough money to pay public servants,” the president told reporters in front of the residential palace, as he blamed a growing economic disaster on restrictive measures imposed by governors to slow the spread of the coronavirus. “Some public servants believe they will have a pay raise. They won’t.”

Bolsonaro is under increasing pressure as he continues to dismiss the coronavirus threat even as Covid-19 rifles throughout Brazil. He’s already lost his health minister, followed by his star justice minister, whose allegations that the president meddled in police investigations are building up steam despite Bolsonaro’s denials of any wrongdoing.

With his administration creaking less than 18 months in office, investors are closely watching how he handles relations with Guedes, another high-profile cabinet member. Guedes has been growing tired of losing budget battles in Congress and has given signs that his future in the administration depends on Bolsonaro’s support for his austerity agenda. Hence, the president’s decision will be seen as a sign of how much influence Guedes retains in the government amid rising pressure for more public spending to offset the pandemic.

The economy ministry declined to comment for the story while Bolsonaro’s office didn’t immediately respond to a request for comment.

Guedes has strongly campaigned for a veto of the bill, saying a two-year salary freeze for public servants would save the government 130 billion reais that could be used to invest in the health system and save lives.

Even if Bolsonaro delivers on his promise, however, Congress may still overrule him.

“If we were to believe in the natural order of things, I’d bet the veto will be overturned by Congress,” Junior Bozzella, deputy leader of the right-wing PSL party, said in an interview. “But now is the time to see if the pork-barrel will yield results.”

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