By LARRY ROHTER
-- In an important advance in the government's effort to cut its deficit
reduce market pressures that have humbled the economy, the lower house of Congress on
Wednesday night decisively approved a change in social security benefits for civil servants after four
earlier attempts had been defeated.
The action is
significant because it takes Brazil a step closer to complying with a $41.5
package that it signed in November with the International Monetary Fund.
The vote also
sends a signal to foreign investors and speculators that the political
skills of President
Fernando Henrique Cardoso and his Cabinet are sufficient to persuade a divided and recalcitrant
Congress to approve his costly austerity program.
The vote on Wednesday
was the second in two days in which the government succeeded in pushing
through fundamental elements of that policy, and it was taken after a long string of reverses that led
to the devaluation of the currency, the real, by more than 25 percent.
On Tuesday the
Senate resoundingly approved a measure that would prolong and increase
a tax on
checks and other financial transactions.
Several other steps remain, however, before Cardoso can proclaim victory.
The tax on financial
transactions, for instance, would have to to be passed by the 513-member
house, which has a reputation for recalcitrance. That measure requires a 60 percent majority vote,
because a constitutional amendment is necessary to enact it.
As a condition for IMF assistance Brazil has to cut its deficit almost in half this year.
has proposed a package of $23.5 billion in tax increases and spending cuts
incorporated in its 1999 budget.
The social security
tax approved by the lower chamber on Wednesday was the central feature
If the tax on
financial transactions is renewed, it is generally expected to add $10
government revenues this year.
new social security tax would add less, $3 billion over two years, but
was far more
controversial. It therefore grew to be emblematic of Cardoso's entire program.
In his election
campaign last year Cardoso portrayed many of the retired government workers
would be affected as a pampered elite.
many of them, including judges, professors and other influential professionals
quickly demonstrated an ability to lobby members of Congress.
last attempt to pass the measure was last month, and the failure of the
then raised questions about Cardoso's ability to deliver what he had promised the International
Monetary Fund and other lenders.
an indication of the controversy that the issue has aroused, opponents
again went to
Congress to demonstrate and had a pushing and shoving match with guards.
spilled over onto the floor of Congress, where Cabinet members circulated
legislators in an effort to win over fence-sitters and the arguments were heated.
One backer of
the bill cited President Clinton's State of the Union speech on Tuesday
in support of
accused Cardoso of selling out Brazil, which has the largest economy in
America, and its 165 million people to the IMF and U.S. banks and investors.
"What the government
has asked for to calm the markets is the blood of civil servants," said
Pinheiro, a leader of the Workers' Party, the main opposition party. "To please investors we are
being asked to massacre retirees and government employees."
overcame such opposition by narrowing the focus of the tax on benefits
and current government workers, 1.4 million people in all.
A blanket exemption
for retirees who earn less than $400 a month was added to the bill, and
sponsors included language that would exempt all but a handful of retirees older than 70 from having
to pay anything at all.
The measure moves
to the Senate, where the government hopes that a vote can be scheduled
early as next week.
The term of Congress
expires on Feb. 1, and any further delays would undo much of the political
effects of the vote on Wednesday night and could lead to an intensification of speculation against the
Copyright 1999 The New York Times Company