Bloomberg News

Rousseff Wins Senate Battle on Brazil Health Care Spending

December 09, 2011

(Updates to add Senate rejection of bill in first paragraph.)

Dec. 8 (Bloomberg) -- Brazilian President Dilma Rousseff’s coalition in the Senate defeated a bill that would have increased public spending more than the government anticipated.

In setting guidelines for public health care spending, the Senate yesterday rejected on bill that would have earmarked 10 percent of federal gross revenue for health while approving another bill that will boost outlays by states and municipalities. The federal government currently spends 6.6 percent of its annual revenue on health care.

“In terms of fiscal policy, it can been seen as a positive result as government expenses are trending toward increasing at a faster pace next year,” said Felipe Salto, analyst at Tendencias Consultoria Integrada. “There wouldn’t be revenue to meet costs next year,” he said in a telephone interview from Sao Paulo.

Finance Minister Guido Mantega has pledged to keep public expenses under control as part of an austerity drive that creates room for the central bank to continue cutting interest rate. The bill rejected by the Senate could have forced the administration to boost health spending by 35 billion reais ($19.3 billion), said Senator Romero Juca, leader of Rousseff’s coalition in the upper house.

States and Municipalities

The bill that was approved will increase health outlays by states and municipalities by 6.7 billion reais, according to Sao Paulo-based consulting firm Tendencias. States fiscal results are part of federal government’s consolidated figures for budget surplus before interest payments, Salto said

States and municipalities are already required to spend 12 percent and 15 percent, respectively, of their revenue on health care. The bill, which now goes to President Dilma Rousseff to be signed into law, tightens the definition of what constitutes such spending. According to Tendencias, 15 of 27 states don’t spend the required minimum on health care.

Lawmakers voted to maintain the current rule that governs federal health spending. The government has to match the previous year’s health outlays while adding a percentage based on gross domestic product growth.

Rousseff’s 2012 budget proposal targets a surplus before interest payments of 139.8 billion reais for the federal, state and local governments -- the equivalent of 3.1 percent of GDP.

--Editors: Harry Maurer, Robert Jameson

To contact the reporter on this story: Maria Luiza Rabello in Brasilia at mrabello@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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