Brazil grapples with protests as wage demands grow

A retired worker holds a poster which reads: "Minimum of 180,00" real, during a protest Tuesday in front of the Brazilian National Congress

BRASILIA, Brazil (Reuters) -- After a tortuous 30-day cross-country march, hundreds of protesters descended on Brazil's Congress on Tuesday to demand a promised hike in the minimum wage threatening to cost the government $2 billion next year.

Wielding banners and shouting union rally slogans, the protesters called for President Fernando Henrique Cardoso to meet his October pledge for a 20 percent salary increase.

"We walked 1,100 kilometers (683 miles). This is no joke. We want to speak with the president," one protester said.

Cardoso late Tuesday agreed to a closed-door meeting with union bosses, who along with hundreds of workers set off on foot from the industrial city of Sao Paulo last month.

Analysts say the government could afford the pay rise, especially after a six-year fiscal austerity drive that has slashed deficits and restored investor confidence in Latin America's biggest economy.

The salary hike would top inflation and leave the monthly minimum wage at 180 reais ($94), up from 151 reais ($79) presently -- which workers have dubbed a "slave's salary," enough to buy basic foodstuffs, but nothing else.

About half of Brazil's population lives at or near the poverty level -- making the proposed monthly increase of just $15 a crucial issue to the poor, and to politicians who represent them.

Cardoso promised the wage raise shortly before October local elections, in which his party was trailing. He already granted an 11 percent increase earlier this year.

Speaking through a megaphone, the president of the House of Deputies Michel Temer told protesters the government was doing everything in its power to meet Cardoso's pledge by as early as January -- and no later than April.

But down the long halls of Congress, bitter debate broke out over how to pay for a minimum wage that would boost public payroll expenses by 3.8 billion reais ($2 billion) next year.

Under a strict spending law passed this year and hailed by Wall Street, Congress must match all expenses with expected revenues in a budget due by December 15.

"The priority of the budget is the minimum salary and there is no way to approve it without defining the sources of revenue," said Sen. Amir Lando.

To that end, some lawmakers have proposed a sweeping crack-down on tax evasion that would target some of the country's biggest corporations by closing tax loopholes and weakening bank secrecy laws.

Congress is also proposing levying a capital gains tax on pension funds, an issue now being weighed by the Supreme Court.

A key Senate leader said the measures would lead to increased tax revenues of more than 11 billion reais ($5.73 billion). That would be enough to cover the wage hike as well as other upcoming government expenditures -- including a more than $1 billion increase in military payrolls.

But the government is reluctant. Budget Minister Martus Tavares said lawmakers' proposals would not guarantee revenues to cover government expenses -- a key requirement of Brazil's so-called "Fiscal Responsibility Law."

He further added in an interview with O Globo newspaper that the issue may be postponed until next year, allowing the budget to be passed without trouble by its December deadline.

"The budget cannot be held hostage by this," Tavares said. "If we do not reach responsible way to (obtain) these revenues, we can return to this discussion in April."

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