Brazil's Finance Minister Henrique Meirelles said that the recovery of the Brazilian economy depends on the balance of public accounts. The statement was made Thursday (Mar. 30) as a response to questions about whether nearly completely reversing payroll tax breaks—a move announced yesterday (29)—could undermine job generation and the recovery of economic activity.

“What will recover the economy is the government's delivering the fiscal target, bringing back balance to public accounts. This allows interest to respond to a decline in inflation. Low inflation will lead to an increase in demand, which makes it possible for these sectors [benefited by tax breaks] to grow in a healthy manner, and not by means of distortions,” Meirelles declared.

The minister went on to say that, regardless of the decrease in tax breaks, employment is sure to get back on track. Jobs are undergoing a recovery, he argued, due to a higher demand among consumers. “Key is that the confidence in the public debt is restored,” he stated.

In effect since 2011, the payroll tax breaks benefit 56 sectors in the economy, which pay 2.5% or 4.5% of revenues to Social Security, instead of collecting 20% on the payroll.

Last night (29), Meirelles and Planning Minister Dyogo Oliveira announced they will submit a provisional presidential decree to Congress revising most benefits. The tax breaks are to be preserved only for the metro and road and railway transport of passengers, plus construction and infrastructure projects and communication. These are key sectors for labor force and for maintaining the recovery of employment, the government argues.