Brazil to cut $ 32 billion from 2012 budget

RIO DE JANEIRO: Brazil’s government may cut as much as much 60 billion reais ($32 billion) from spending in 2012 in an effort to control its deficit and inflation, the Estado de S. Paulo newspaper reported, citing unnamed Finance Ministry officials.

Brazilian President Dilma Rousseff, who marks one year in office on Sunday, 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 percent of gross domestic product while still finding new money for social and infrastructure spending, Estado said. 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.

It also could increase tensions with public servants demanding salary increases, Estado reported. Finance and planning ministry press officials did not answer calls from Reuters requesting comment on New Year’s Day.

A media spokeswoman for Brazil’s presidential palace told Reuters that officials were unavailable for comment.

The proposed cuts represent almost 10 percent 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 ($1.2 trillion) in 2012, 8.6 percent more than in 2011, according to the Planning Ministry. Of that, 41 percent will go to pay local and foreign debt and 26 percent will go to social security payments.