Brasília – The Brazilian government has announced this Thursday (20th) that the 2014 Federal Budget cut will amount to R$ 44 billion (US$ 18.3 bn at current exchange rates). With the cut, the government is aiming for a primary surplus equivalent to 1.9% of the Gross Domestic Product (GDP), in a bid to keep solid macroeconomic foundations and maintain the confidence levels of international investors and the domestic market alike.<\/p>\n
The R$ 44 bn cut is higher than 2013’s R$ 38 bn (US$ 15.8 bn), but lower than those of 2012 (R$ 55 bn – US$ 22.9 bn) and 2011 (R$ 50.1 bn – 20.9 bn). Out of the total cut, R$ 13.5 bn (US$ 5.6 bn) concern mandatory expenditures, and R$ 30.5 bn (US$ 12.7 bn) concern discretionary expenditures. <\/p>\n
To Brazil’s Finance minister Guido Mantega, the cut has sent a good signal to the domestic and foreign markets, considering the international economic turmoil underway. He said increased optimism from economic players regarding Brazil should ensue after the cuts. <\/p>\n
The government’s forecasts were based on the following parameters: a primary surplus equivalent to 1.9% of the GDP, equivalent to R$ 99 bn (US$ 41.3 bn); a 5.3% inflation rate, and dollar-to-real ratio of 1 to 2.44. <\/p>\n
The Brazilian ministries of Health, Education, Social Development, and Science and Technology were spared from the 2014 Budget cuts. These four areas are regarded as priorities by the government. <\/p>\n
The budget forecasts for these four ministries are as follows: slightly above R$ 82.5 bn (US$ 34.3 bn) for Health, R$ 42.2 bn (US$ 17.6 bn) for Education, R$ 31.7 bn (US$ 13.2 bn) for Social Development and R$ 6.8 bn (US$ 2.8 bn) for Science and Technology. All of the amounts are higher than the budget allocations in 2013. <\/p>\n
“The tools we have employed include cutting cost-related spending, increasing investment and maintaining social programs,” said Mantega.<\/p>\n
Out of the R$ 30.5 bn (US$ 12.7 bn) cut in discretionary expenditures, i.e. those whose allocation the government has autonomy to decide upon, R$ 13.3 bn (US$ 5.5 bn) consist of formerly forecasted expenditures on amendments to the Federal Budget Law. The budget earmarked to amendments has dropped from R$ 19.76 bn (US$ 8.2 bn) to R$ 6.46 bn (US$ 2.6 bn).<\/p>\n
The Growth Acceleration Program (PAC, in the Portuguese acronym) saw the second sharpest cut, after amendments: R$ 7 bn (US$ 2.9 bn) – from R$ 61.46 bn (US$ 25.6 bn) to R$ 54.46 bn (US$ 22.7 bn).<\/p>\n
Translated by Gabriel Pomerancblum<\/strong><\/p>\n