Brazil’s Government Cuts Social Programs to Subsidize Fuel

By Lise Alves, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – The federal government of Brazil announced yesterday (Thursday, May 31st) cuts of R$1.2 billion in social programs, infrastructure, incentives for exporters and maintenance of federal highways to cover the R$9.58 billion in expects to lose after giving into strikers’ demands and subsidizing diesel fuel prices. Sectors affected by the decision say they have been abandoned by the federal government.

“We regret the reduction of Reintegra [incentive program for exporters]. The moment is bad for the decision, which signals the abandonment of the export sector,” Brazilian Foreign Trade Association (AEB) president, José Augusto de Castro, told a government media agency.

The federal government will reduce the tax credit from two percent to 0.1 percent. “It is a decision that pushes Brazil even further away from the global chains, removing the competitiveness of our manufactured products,” concluded Castro.

According to government officials the subsidy for the price of diesel, granted to strikers to end the nine-day protest which paralyzed the country, will cost R$9.58 billion in revenues. Resources which will have to be obtained by the government in other ways.

In all, R$1.2 billion in expenses, investments or benefits not received by the federal government due to incentive programs were extinguished. The government will also use resources from reserves in the amount of R$6.2 billion, as well as reserves of capitalization of public companies totaling R$2.1 billion to make up for the subsidy given to diesel fuel.

Among the programs scheduled to have their funds reduced or even extinguished are public policies for youth, policies against violence against women, improvement in public health (SUS), agrarian reform, monitoring of federal highways by federal police, monitoring and demarcation of indigenous lands and public policies against drugs.