Brazil's finance ministry to back minimum wage increase starting in May -sources

FILE PHOTO: Brazil's Economy Minister Fernando Haddad greets President Luiz Inacio Lula da Silva during a meeting to sign the government's economic package at the Planalto Palace in Brasilia, Brazil January 12, 2023. REUTERS/Adriano Machado

BRASILIA (Reuters) - Brazil's finance ministry sees room for leftist President Luiz Inacio Lula da Silva to raise the minimum wage as of May at a cost of up to 5 billion reais ($975 million) to the government, two sources in the ministry told Reuters on Friday.

The sources, who spoke on condition of anonymity as the discussions are private, said a review of government spending, including curbing fraud in the Bolsa Familia welfare program, would pave the way for the new increase to be granted.

"The minimum wage is easier to accommodate. If you are going to give an increase in May to reach 1,320 reais ($257), which would be everyone's wish, it would be more or less 5 billion reais," said one of the sources.

The decision, which would bring the minimum wage up from 1,302 reais now, contrasts with the latest stance by Finance Minister Fernando Haddad that the current level already fulfilled Lula's campaign promise to increase workers' earnings above inflation.

Haddad, however, did not deny the possibility of a new increase and said that the topic would be studied further.

A real wage gain has already happened this year because the government of then President Jair Bolsonaro had forecast higher than observed inflation for 2022 when proposing this year's budget.

Because of that, the resources to guarantee a minimum wage increase that only compensated for past inflation were enough to secure a raise of 1.4%, to the current level.

The newly-inaugurated Lula government set aside 6.8 billion reais in this year's budget to further increase the minimum wage to 1,320 reais, a figure made public by Lula's allies before he took office.

But under the argument that beneficiaries of the social security system had increased in higher than expected numbers, the new government decided not to raise the minimum wage right away.

Last month, Lula said the minimum wage policy for the coming years should take into account the country's economic growth, setting up a working group to debate the subject.

Haddad said recently that the policy of raising the minimum wage "a little above inflation" would help boost low-income consumption.

($1 = 5.1300 reais)

(Reporting by Bernardo Caram; writing by Marcela Ayres; Editing by Bill Berkrot)

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