RIO DE JANEIRO – The Brazilian government will soon detail plans to reduce public spending from the levels set months ago in the 2014 budget, Finance Minister Guido Mantega said Tuesday.
“The cut we will make is not defined, but it will certainly be one capable of maintaining fiscal solidity and the stability of the net Brazilian debt,” he told reporters, confirming rumors that the government was preparing to trim spending amid signs that investors are souring on emerging markets.
“We are conducting studies, debates and simulations. When we conclude all of that we will have a definite number,” the minister said.
President Dilma Rousseff’s administration may reduce outlays by more than 28 billion reais ($11.67 billion), press accounts suggest.
A cut of that size would allow the government to achieve its goal of ending 2014 with a primary budget surplus, excluding debt service, equal to roughly 2 percent of Brazil’s gross domestic product.
The government hopes to calm markets and stem the sharp fall of the real against the dollar as analysts and pundits talk of a possible emerging markets crisis, according to O Globo newspaper.
Mantega attributed the depreciation of the real to slower growth in China – Brazil’s main trading partner – and to expectations that the U.S. Federal Reserve may accelerate the winding-down of its stimulus efforts.
“When China grows less, it consumes fewer raw materials, which affects the markets as a whole as it (China) is one of the biggest global consumers,” the minister said.
Brazil, he insisted, is better placed than other countries to cope with a crisis.
“We have many (international) reserves and a small external debt. As our reserves exceed the external debt, our situation is stable,” Mantega said.