The Economist, 08/18/2012
In recent years Brazil’s government has been able to avoid tough spending choices. Faster economic growth and falling tax evasion have translated into steadily rising revenues, allowing the federal government to hire more workers and pay them more, as well as to boost pensions and social transfers (see chart 1). But the fat times are over. In 2011 economic growth was only 2.7%; this year 2% looks optimistic. Tax revenues are rising only a little faster than inflation. The government can no longer satisfy everyone.
The noisiest demands come from public-sector workers. Teachers at federal universities have been on strike for three months; they have recently been joined by federal police, tax officials and staff at some regulatory agencies. Around 300,000 have walked out, almost half the federal workforce. Police have blocked roads and worked to rule at airports, causing travel chaos. Striking customs officials have left goods stuck in ports. The strikers’ demands would swell the federal government’s salary bill by up to 50%; inflation is running at 5.2%.
The president, Dilma Rousseff, has made clear her irritation. Most federal employees have had big pay increases since 2003, when her Workers’ Party (PT) came to power. On average, federal salaries are now around double the private-sector rate for equivalent jobs, points out Raul Velloso, a public-finance specialist in Brasília.
