Brazil might cut as much as much 60 billion reais (US$ 32 billion) from spending in 2012 in an effort to control its deficit and inflation, the daily newspaper O Estado de S Paulo reported, citing unnamed Finance ministry officials.
Brazilian President Dilma Rousseff who on Sunday marked one year in office had planned to ease financial controls in 2012 after trimming about 50 billion reais in spending in 2011, the newspaper said.
The new cuts are needed to allow Rousseff to meet a goal of holding the government’s deficit before interest payments on debt to 3.1% of GDP while still finding new money for social and infrastructure spending.
This goal has been made more difficult by a sluggish U.S. economy and the European debt crisis.
The spending cuts could increase tension with Congress, which is seeking 32 billion reais of additional spending ahead of municipal elections in October, the paper said.
The proposed cuts represent almost 10% of the 618.7 billion reais of current program spending in the 2012 budget, according to the Planning ministry’s website. Current spending represents less than a third of Brazil’s total budget.
Brazil plans to spend 2.23 trillion reais (US$ 1.2 trillion) in 2012, which is 8.6% more than in 2011, according to the Planning Ministry. Of that, 41% will go to pay local and foreign debt and 26% to social security.
Brazil’s government faces as much as 74 billion reais (US$ 40 billion) of unbudgeted expenses in 2012 stemming from lawsuits awaiting judgement at the country’s Supreme Court, the Correio Brasiliense newspaper reported on Sunday.
The principal risk to the government comes from a case that will determine if workers who take early retirement on a partial pension can return to work and eventually qualify for a full pension, the newspaper said, citing a report from the country’s Attorney General’s office, which represents the government in court.
If the court rules in favor of the retirees, the government faces an estimated 50 billion reais (US$ 27 billion) of new payments to about 500,000 workers, said Correio Brasiliense, the main paper in Brazil’s capital, Brasília.
One Supreme Court judge has already ruled in favor of allowing workers to transform their partial benefits into full benefits by returning to work after retirement, the paper said.
The case comes as tension grows between the government of President Dilma Rousseff and the country’s judges. Rousseff has resisted a pay increase for judges in the 2012 budget.