Lula blow over Brazil wage vote

By Tom Gibb
BBC correspondent in Sao Paulo

Brazilian President Luiz Inacio Lula da Silva has suffered a major political defeat with the Senate voting for a monthly minimum wage of $90 which the government says is higher than the country can afford.

Lula has tried to keep a tight grip on public spending

Since coming to office last year, Brazil's first working-class president has struck to a strict austerity programme to try to keep the country's massive public debt under control.

The issue of the minimum wage is extremely sensitive for Lula, as the Brazilian president is known.

During his years in opposition, Lula made increasing it a central plank in the platform of his Workers' Party.

Before his election, Lula promised to double its real value during his first four years in office.

In power, he has had to backtrack. Instead the priority is now keeping public spending and the debt under control to try to encourage investment.

Pensioners

The government is now admitting that its pre-election promise was unrealistic.

Lula wanted to keep the wage increase down to 260 Brazilian reais, or about $85 a month.

The Senate rejected this and instead passed a wage of around $90.

Given that about a third of the country's workers and state pensioners are on the minimum wage, this could mean a big increase in public spending.

Twelve senators from the government's coalition voted for the higher wage increase. The proposal will now be sent back to the lower house where the government will have its work cut out to stop another defeat.