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Brazil reforms to 'defeat the crisis': Temer

December 30, 2016

President Michel Temer has predicted that his reforms will pull Brazil's ailing economy out of recession by next year. The country is facing a record high unemployment rate and its worst recession in more than a century.

Michel Temer
Image: picture-alliance/dpa/Citypress24

Among Brazilian President Michel Temer's key policies in the new year will be structural reforms to the country's labor market.

During a press conference on Thursday, Temer said he expects Brazil's Congress to approve plans to simplify the hiring of workers on temporary contracts. Lawmakers had shown "strong support" for his proposals, he said.

Congress this month has already approved measures to limit growth on public spending for the next 20 years. The move sparked a wave of protests, with critics accusing the government of hurting the country's poor.

Record unemployment

Despite Temer's positive outlook, things appear to be getting worse before they get better. Data released Thursday by Brazil's national statistics institute, IBGE, showed that in the three months from September to November, unemployment had hit its highest level since 2012, when Brazil changed how it measures the rate.

With the country struggling through its worst recession in more than a century, the IBGE figures put the unemployment rate at 11.9 percent. That's a total 12.1 million Brazilians currently out of work, 3 million more people than during the same period last year.

The figures come as little surprise, however. Brazil's unemployment rate has repeatedly hit new highs since May 2015.

Temer, however, remained upbeat Thursday, saying that 2017 "will be the year that we defeat the crisis."

"It is very likely unemployment will fall as a function of the measures we are taking," he added.

Economists expect Brazil's economy to only return to growth by the middle of 2017, at the earliest, and perhaps only by a small margin. With employment generally lagging during economic rebounds, the unemployment rate is likely to continue to rise before it turns a corner.

Brazil's central bank said it predicts the economy to grow by 0.8 percent next year.

Brazil's 20-year austerity plan under fire

More structural reforms on the horizon

Temer also signaled that he intends to simplify Brazil's complex tax system, which economists have viewed as a barrier to long-term growth. According to the World Bank's "Doing Business" index, Brazilian firms spend an average 2,038 hours doing their taxes. That's 12 times that of the average of an OECD country, a group of mostly wealthy states.

"Why not pursue tax reforms now that plenty of bills have advanced?" Temer said Thursday.

An unnamed source reportedly told news agency Reuters that a new tax system would likely simplify the oil and gas industry's tax regime, alter levies on the financial sector and generally tear up red tape.

Temer also said he would back Congress' efforts to reform Brazil's political framework. "The theme of political reform belongs to Congress but we'll support it," he said.

Currently, some 35 parties are registered in Brazil's electoral court, and a further 26 represented in its lower house of Congress.

Lawmakers point to the proliferation of parties as a driver for political corruptionin the country. Brazil's Congress is currently marred by broad political coalitions and deal-making. 

Temer himself is facing calls for his impeachment. He is currently under investigation for receiving illegal campaign contributions, a charge he denies. 

Temer took over from former President Dilma Rousseff in May, after she was impeached for allegedly meddling with fiscal accounts.

The bribing Brazilians

dm/cmk (AP, AFP, Reuters)