BRASILIA, May 16 (Reuters) - Brazilian President Michel Temer on Tuesday gave hefty debt relief to cities and states that owe billions of dollars in pension payments to the federal government, winning mayors’ support for his unpopular pension reform.
Through a decree, Temer extended the payments of those debts for over 16 years and cut interest, fines and other charges. Government data showed that close to 4,000 municipalities owe about 75 billion reais ($24.28 billion) in pension contributions.
The head of the national confederation of municipalities, Paulo Ziulkoski, said mayors will support Temer’s controversial proposal to cut pension benefits in order to put the country’s finances back in order.
Temer, an experienced politician who became president last year after the impeachment of leftist Dilma Rousseff, is racing to get the 308 votes needed to approve the reform in the Lower House of Congress.
“This could be positive for the vote,” said Thiago de Aragao, a partner with Brasilia-based political consultancy ARKO. “Mayors are among the ones who pressure the most congressmen to adopt a position.”
The reform proposal needs to be approved twice by two-thirds of the lawmakers in both chambers of Congress.
Although the cost of the debt relief for the government was not immediately clear, a government source said it would have little fiscal impact in the short term.
“It may not send the right message on austerity, but this is debt that we didn’t expect to recover in full anyway,” said the official, who requested anonymity
The government is also negotiating giving debt relief to rural producers, in a move that experts say could also produce more votes for Temer’s reform agenda. A decision could be made as early as Wednesday, lawmakers participating in the negotiations have said. ($1 = 3.0887 reais) (Additional reporting by Lisandra Paraguassu; Editing by Jonathan Oatis)