Brazil Congress approves major spending bill

Brazil's Congress on Wednesday approved the main text of a major pre-election spending package that President Jair Bolsonaro is banking on to lift his flagging re-election hopes, despite expectations it will fan double-digit inflation and hurt Brazil's exchange rate. Brazil's lower house approved the measure, but still had to vote on two specific amendments to its text.

Brazil's Congress on Wednesday approved the main text of a major pre-election spending package that President Jair Bolsonaro is banking on to lift his flagging re-election hopes, despite expectations it will fan double-digit inflation and hurt Brazil's exchange rate.

Brazil's lower house approved the measure, but still had to vote on two specific amendments to its text. The bill amends the constitution to bypass the country's spending cap and boost social benefits. It now must be formally enacted by both houses in a joint session of Congress. The package includes a 1,000 reais ($185) payout for self-employed truckers and benefits for taxi drivers. It also increases by 50% the amount paid in the Auxilio Brasil social welfare program.

The new legislation is likely to fan inflation, and may result in fresh monetary tightening, analysts told Reuters. A previous iteration of the bill foresaw federal compensation to the states for fuel tax cuts.