While preparing to fly to Europe, where he would meet with authorities and investors, Brazil’s Finance Minister, Fernando Haddad, announced on Sunday, November 3, the cancellation of his trip scheduled for the following day. According to a press release, the Brazilian president, Luiz Inácio Lula da Silva, would in fact have “order” stay in the country to concentrate on a “domestic theme” priority: a project of budget cuts.
If the former metallurgist was elected on the basis of a social program, a law establishing a “budget framework” approved in August 2023 by Congress forces it to follow a strict policy, which results in austerity. In fact, the text limits real spending growth to 2.5% annually.
However, the measure was presented by Lula’s own government, made up of ministers from parties of different political orientations and in front of a Congress dominated by the opposition. He is thus forced to carry out painful arbitrations to satisfy his allies. HE “budget framework” It also intended to replace another more rigid law, adopted in 2016 under the government of Michel Temer, which provided for the freezing of public spending for a period of twenty years.
According to Felipe Salto, chief economist at the investment firm Warren, the government plans to reduce “mandatory expenses” defined by the Brazilian Constitution, which represent more than 90% of total spending. According to government data, in October they amounted to 3.98 trillion reais (632 billion euros), or 19.4% of the gross domestic product (GDP).
Reduce public debt
among the “main candidates” the objective of these cuts, predicts the economist “Cuts in the health and education sectors, where spending increases the most”as well as a subsidy for workers who earn up to double the minimum wage. He also believes that unemployment insurance, social security and the subsidy for low-income people over 67 or disabled could be deindexed from the minimum wage.
The expert also recalls that the Government is committed to ending the year 2025 with a “zero deficit”with the aim of reducing public debt, which amounts to 76.6% of GDP. To guarantee this objective, “We need to make a cut of around 40 billion reais”calculate.
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