Brazil Announces Cuts of R$42.1 Billion to Meet Budget Target

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The finance minister of Brazil, Henrique Meirelles, announced Wednesday, March 29th, measures that will allow the government to meet the primary result target for this year, which is a deficit of R$139 billion. With the current budget, the government is R$58.2 billion above that target.

According to Meirelles the government will have to cut R$42.1 billion from the budget and expects another R$16.1 billion from extra revenues to reach its target. The official, however, noted that the measures do not include raising taxes.

“This is a process of the utmost importance because it is a revenue increase without raising tribute. It is a virtuous measure,” said the Finance Minister during a press conference.

Among the measures to be taken to reduce public spending and reach the government’s target are the withdrawing payroll tax breaks, selling four hydroelectric plants, and raising IOF (tax over financial operations) for credit coops.

In addition, the government will also cut down expenditures of the ministries, reduce investments in the Growth Acceleration Program (PAC) and do away with non-mandatory Congressional amendments.

The withdrawal of tax breaks from certain sectors, says Meirelles can not be seen as a tax increase.

“This measure is not actually considered a tax increase. It is the elimination of an option adopted by the previous government and that did not work. It’s not a tax increase,” he told reporters during the press conference. With the measures, the government abandoned one of the private sector’s biggest concerns: increase of the tax burden.

Fears that the government would be announcing an increase in taxes, led representative from large business entities to fly to Brasilia earlier this week to speak personally to Meirelles about the government’s plans.

“I was trying to show the minister the importance of a moment like this, in which businessmen are striving to resume the growth of the country,” said Fiesp (São Paulo Federation of Industries) President, Paulo Skaf to local news media after leaving a meeting with Meirelles earlier this week.

“It would be harmful, contradictory and very bad to raise taxes. In Brazil, there is already a high tax burden,” Skaf concluded.