Friday, 4 February 2011

Brazil's Unions push for higher minimum wage

Brazil's President Dilma Rousseff met with the country's unions to discusstheir demand for a higher minimum wage. Rousseff, who endorsed the increase in the past, is now faced with the challenge of trying to contain the already overstretched public spending budget.

Brazil's minimum wage rose 62 per cent under former president Luiz Inacio Lula da Silva, but Rousseff wants to up the number by an additional 6.8 per cent this year to 545 Reals, using a formula set by the unions and Lula in 2006. The unions want the boost to go up to 580 Reals. If the goal of the unions is met, Rousseff's plans to curb spending needed to cool inflation will be put on hold.

Under the formula, spending is already set to increase 10 billion Reals this year because pension benefits are indexed to the wage. The pressure on resources is being compounded by Rousseff's pledge to invest 955 billion Reals to modernise the country's airports and carry out infrastructure improvements ahead of hosting the 2014 World Cup and 2016 Olympics.

In a speech at the opening session of Congress on 2nd February, Rousseff told lawmakers she was committed to “maintaining a macro-economic policy compatible with fiscal balance, a firm control of inflation and rigorous use of public money.” While promising to continue Lula's policy of granting workers' wage increases above inflation, she said stable rules needed to be put in place so that the salary gains are “compatible with the state's financial capacity.” The vote on minimum wage increase is expected to take place in March.

Sources: FT, Latin America Monitor, Bloomberg

For more news and expert analysis about Brazil, please see Brazil Focus.

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