Brazil cuts budget by $6 billion amid recession

SAO PAULO – The Brazilian government Friday announced nearly $6 billion in spending cuts in its 2016 budget amid the country’s worst recession in decades.

The announcement was made by Finance Minister Nelson Barbosa and Planning Minister Valdir Simao.

The 23.4 billion real ($5.9 billion) cut was announced two days after credit agency Standard & Poor’s downgraded Brazil’s sovereign credit rating to two notches below investment grade territory on “significant political and economic challenges”.

Brazil’s currency has plunged almost 50 per cent against the dollar, and inflation was over 10 per cent at the end of 2015.

The largest budget cuts were made in the Mines and Energy, Health and Education Ministries,

The Mines and Energy Ministry saw its budget reduced by 3.14 billion reals ($785 million). The Health Ministry’s budget was slashed by 2.5 billion reals ($625 million) and the Education Ministry suffered a 1.3 billion real ($325 million) cut.

Despite the cuts, Simao said there would be “no lack of funds” for the campaign to eradicate the Aedes aegypti mosquito that spreads the Zika virus, poverty relief programs and the staging of the upcoming Olympic Games.

Barbosa and Simao also announced a downward revision of the country’s expected 2016 Gross Domestic Product.

GDP is now expected to come it at minus 2.9 per cent compared to an original estimate of minus 1.9 per cent.

Also on Friday, the government said the number of people unemployed between September and November of 2015 had increased 41.5 per cent compared to the same period one year earlier.

IBGE statistics bureau said 9.1 million were jobless during the period.

Unemployment has been rising as a result of a contracting economy that has led to layoffs in the manufacturing and service sectors.