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Brazil Announces Spending Cuts, New Taxes


President Dilma Rouseff speaks about proposed budget cuts in Brasilia. The government is seeking to reduce a deficit in the 2016 budget. The government has also proposed tax increases on financial transactions. (AP Photo/Eraldo Peres)

President Dilma Rouseff speaks about proposed budget cuts in Brasilia. The government is seeking to reduce a deficit in the 2016 budget. The government has also proposed tax increases on financial transactions. (AP Photo/Eraldo Peres)


Brazil is seeking to reduce a budget deficit that led to a drop in the country’s credit rating last week.

On Monday, the government announced spending cuts and tax increases totaling almost $17 billion. The government said it plans to bring back the CPMF, a tax on financial transactions. The government hopes to raise more than $8 billion next year if Congress accepts the tax. However, many lawmakers oppose the measure.

Other proposed cuts would reduce government aid for farmers, infrastructure improvements and pay for government employees. Public health and low-cost housing programs could also face cuts. The government reduced tax subsidies for the chemical industry. It also reduced aid for exporters of manufactured goods and raised taxes on capital gains, profits from sales of investments.

The most recent measures are meant to cut a deficit in the budget next year. Brazil’s economy has shrunk for the past six months. That means its economy is in recession.

At the same time, President Dilma Rousseff has experienced a drop in popularity. Opposition members in Congress dismissed the cost-cutting measures as too little. Some are calling for the president to resign.

The Reuters news service reports that economists have say the expected savings look promising. However, it remains unclear if the measures will clear Congress without amendments. The speaker of Brazil’s lower house of Congress, Eduardo Cunha, said the president’s administration lacked the support needed in Congress to approve the proposed return of the CPMF tax.

The head of the Brazilian Senate, Renan Calheiros, said deeper cuts were needed to reduce the size of the federal government before Congress will agree to more taxes.

Government officials also say 10 ministries will be closed to save money.

The proposed reduction in public health and housing spending will be difficult for supporters of President Rousseff. Her Workers’ Party has resisted cuts to social programs.

Predictions of a big budget deficit in 2016 caused Brazil to lose its high credit rating last week. The rating agency Standard & Poor’s no longer considers the country’s credit rating as investment grade.

The downgrade means some foreign investment funds and other large investors may be forced to sell Brazilian government bonds. However, the value of Brazilian money, the real, increased on news of the cost cutting measures to reduce the deficit.

I’m Mario Ritter.

This story was based on a story by Reuters. Mario Ritter adapted it for Learning English. George Grow was the editor.

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Words in This Story

transactions – n. a business deal; an event in which goods, services, or money are passed from one person or account to another

subsidies – n. money paid, usually by a government, to keep the price of a product or service low or to help a business organization to continue

capital gains – n. profits from the sale of some form of investment

funds – n. investments that use money from many investors to buy securities which are held in a fund which issues shares

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