World Economy

Brazil Unveils Budget Cuts

Brazil Unveils Budget CutsBrazil Unveils Budget Cuts

Brazil announced budget cuts expected to total $8.4 billion a year as it reins in government spending at the start of another year with the economy in the doldrums.

President Dilma Rousseff, narrowly reelected in October, signed a decree limiting discretionary spending on travel, services and purchasing, AFP reported.

Brazil’s planning ministry said the cuts would save 1.9 billion reais ($703 million) a month, or about $8.4 billion a year.

The Brazilian Congress, currently in recess, has yet to approve the 2015 budget.

“The government is sending a clear sign on budget cuts as a difficult year awaits and it is starting off by cutting spending to reduce risk,” Jose de Lima Goncalves, chief economist with Fator Bank in Sao Paulo, told AFP.

“Under the new Rousseff government there will be a budgetary policy of restraint rather than the expansion of previous years,” added Goncalves.

  Aiming for Surplus

New Finance Minister Joaquim Levy is aiming for a surplus before debt servicing of $66 billion, or 1.2 percent of GDP, this year to restore market confidence.

Another measure Brasilia has announced to kick off a new era of relative austerity is tightening access to unemployment insurance.

The public accounts deteriorated in Rousseff’s first term amid continued massive provision of social welfare programs which have lifted tens of millions of people out of poverty over the past decade.

  Oil Discovered

Brazil’s state-run oil company Petroleo Brasileiro SA and its Indian partners have found more light crude oil in the Sergipe Basin off Brazil’s northeast coast, according to a securities filing on Thursday, Reuters said.

The discovery in the BM-SEAL-11 exploration block is one of several in recent years in an area believed to hold more than 1 billion barrels of recoverable oil, or enough to supply all needs in the United States for nearly 2 months.

Petrobras owns 60 percent of BM-SEAL-11 and is the operator. IBV Brasil SA owns the rest. IBV is a 50-50 joint venture between India’s Videocon Industries Ltd and Bharat Petroleum Corp. The securities filing said drilling in the 9-BRSA-1280D-SES well on the Farfan prospect found a new 28-meter column of oil. It also confirmed the presence of light crude at density of 37 to 40 degrees on the American Petroleum Institute Scale first announced in 2013.

The discoveries also include natural gas. Farfan is located 107 kilometers (66 miles) east of Aracaju, the capital of Brazil’s Sergipe state, the filing said.