By William Jones, Contributing Reporter
RIO DE JANEIRO, BRAZIL – The Brazilian Ministry of Finance has announced that they will cut R$44 billion (US$18.5 billion) from the 2014 budget in a strategy meant to regain market confidence through a tighter fiscal policy as Brazil’s government tackles a growing public debt.
The government seems to have followed the advice of Credit Suisse analysts, who estimated last week that R$43 billion in budget cuts was the minimum amount needed to restore credibility.
Finance minister Guido Mantega announced that the cuts will allow the country’s economy’s GDP to stay at 1.9 percent. Mantega believes that Brazil will be ahead of many other emerging economies, as well as maintaining the continued reduction of public debt.
“Let’s do what we did last year in terms of results. We’ve managed larger results in the pre-crisis period, but since then, it has become more difficult to make a larger primary deficit,” Mantega said. He added that the goal is moderate. “The projections are achievable, realistic and very conservative,” he affirmed.
Some analysts believe President Dilma Rousseff’s efforts to drag the country toward further economic growth by increasing public spending led to a wider budget deficit and brought inflation closer to six percent in 2014. The consequential rise in prices and lack of consumer confidence has held back economic growth in one of the world’s biggest emerging markets. The country’s current government is assuming 2.5 percent GDP growth, well above the 1.79 percent market forecast.
According to Minister of Planning, Budget and Management, Miriam Belchior, US$5.62 billion of the cuts will be slashed from mandatory spending and US$12.70 billion from discretionary spending. However, a decrease in spending has been deemed unlikely by experts with the World Cup looming just months away and many of the stadiums still unfinished.
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