Brazil to present fresh fiscal package in bid to balance public accounts

(Reuters) -Brazil’s government will unveil on Tuesday a fresh set of measures aimed at balancing its accounts, Finance Minister Fernando Haddad said, in its latest bid to ease fiscal concerns after a tax hike last month triggered backlash.

Speaking at a press conference, President Luiz Inacio Lula da Silva said he would host a lunch with Congress leaders at 1300 local time (1600 GMT) on Tuesday to discuss the matter before any proposal is formally presented.

Investors have been eagerly awaiting the new package, which Haddad told reporters earlier on Tuesday would consist of “structural, lasting measures,” as the government tries to hit its goal of eliminating its deficit before interest payments this year.

The minister did not immediately provide details on the new measures, but he said the package on the table is superior to the one presented at the end of last year, when the government projected 70 billion reais ($12.39 billion) in spending restraints through 2026.

“The flight plan is well established,” Haddad said, adding that the measures had initial support from congressional leaders and would only need fine-tuning in the meeting with Lula. “You will know the decision in the coming hours, once he has approved the measures.”

The minister also said the changes would likely involve submitting a constitutional amendment proposal, along with a bill and an executive order to Congress.

On Monday, he emphasized that any changes to a recent increase in the tax on financial transactions (IOF) would be tied to broader corrections of what he described as distortions in financial taxation.

Haddad had pledged new structural measures after an increase in the IOF tax rate for some transactions sparked private-sector criticism and threats from lawmakers to overturn it.

Lula’s government has said it aims to rebalance the federal budget by eliminating tax distortions and what it sees as unjustified tax benefits, rather than cutting spending, which has risen since he took office.

However, several measures to curb tax incentives have been significantly watered down or ignored by Congress.

($1 = 5.6509 reais)

(Reporting by Gabriel Araujo in Sao Paulo and Marcela Ayres in Brasilia; editing by Andrew Heavens, Brad Haynes, Mark Heinrich and Andrea Ricci)