The government of President Luiz Inácio Lula da Silva yesterday was reeling from a damaging defeat in Brazil's Congress over a minimum salary bill that could raise expenditures by more than US$5bn.

The Senate approved a bill late on Wednesday to increase the minimum salary from R$260 ($114, €92, £64) a month to R$384, overruling by far the R$300 proposed by Mr Lula da Silva. The increase would derail the government's budget and could put at risk surpluses needed to service debt.