Brazil finance chief defends proposed cap on gov't spending

Brazil's Finance Minister Henrique Meirelles on Tuesday defended a proposed constitutional amendment to limit government spending over the next 20 years.

If the bill passes, spending could only increase in keeping with the inflation rate of the previous year for the next two decades.

Meirelles said the proposed cap has already helped boost the Brazilian economy and urged lawmakers in a video statement not to reduce the 20-year duration of the measure because a shorter period would not effectively curb spending.

"Approval of the amendment as it stands will be an important signal to economic agents, consumers, investors and businessmen that Brazil is serious about the fiscal problem and committed to undertaking reforms needed to restore growth," he said.

The controversial proposal passed an initial round of voting in the Chamber of Deputies, and was to be voted on again Tuesday night.

The government expects the measure to be approved by a landslide.

Critics of the bill said that in the past decade, government spending on healthcare and education rose by much more than the inflation rate, as did the minimum wage, and that helped shrink Brazil's historic wealth gap.

Setting such a drastic limit may reverse the headway made in promoting equality, they said.

In addition, the measure fails to consider that Brazil, as a country with an aging population, will have to invest more in social security and public healthcare in the next few decades, they added. Endi