Ivan Richard Reporter Agência Brasil

Brasília – As of today, the monthly minimum wage in Brazil rises from R$545 to R$622. The nominal increase of R$77 works out to R$20.73 per day or R$2.83 per hour. The reason for the increase of more than 14% (a 9.2% real increase) is a temporary decree (“medida provisória”) approved by Congress that bases adjustments of the minimum wage on the Broad Consumer Price Index (“IPCA”) one year ago, plus GDP growth two years ago.

[Background note: two years ago Brazil had China-like growth of over 7% as the government reduced sales taxes and loosened credit so as to stimulate consumption with one eye on the international financial crisis and the other on the presidential elections]

According to the government, the new minimum wage, linked to benefit payments for some 48 million Brazilians, will cost the Social Security system almost R$24 billion a year. However, as some R$47 billion will be injected into the economy, the union-linked Department of Statistics and Socio-Economic Studies (“Dieese”) says that around R$22.9 billion will return to the government in the form of tax revenue.

Allen Bennett – translator/editor The News in English

Link - Novo salário mínimo nacional de R$ 622 entra em vigor hoje