Lula's popularity is falling

President Lula has approved an increase of just 2% in real terms, resulting in a wage of $88 (�50) a month.

Trade unions have called the increase "lamentable" and say it will be the focus of May Day protests.

But the government says it must curb spending to meet loan conditions set by the International Monetary Fund.

The announcement of the new minimum wage came late on Thursday, after several postponements and no fewer than six ministerial meetings.

The outcome is that from Saturday, 1 May, Brazilian workers will be guaranteed 260 Brazilian reals ($88) a month, up from the previous level of 240.

The BBC's Steve Kingstone in Sao Paulo says that represents an above-inflation rise, but only just.

Expectations dashed

Brazilian employers praised the move, calling it responsible. But the country's main trade union federation, the CUT, has denounced the increase.

Unions were already angry at Brazil's persistently high rates of unemployment, after it was announced earlier this week that the jobless total had gone up for the third month in a row and now stands at nearly 13% of the workforce.

CUT President Luiz Marinho said: "A minimum wage of 260 reals is lamentable. This will be grounds for protest."

The government's allies in Congress and members of Lula's own Workers' Party have expressed similar views, accusing the president of representing the interests of the IMF.

Our correspondent says expectations were high because the president, himself from a working class background, promised to double the minimum wage during his term of office.

He adds that Lula has until the end of 2006 to deliver, but the president's popularity is now falling and Brazil will go to the polls in local elections in just five months' time.