Brazil announces nearly $32 bn in cuts to 2012 budget

Brazil's government on Wednesday announced nearly $32 billion in spending cuts to its 2012 budget but said social programs and major investments for the 2014 World Cup and 2016 summer Olympics would not be affected.

"We have made a big cut of 55 billion reals (nearly $32 billion)" in budget expenditures, Finance Minister Guido Mantega told a press conference.

The cuts aim to ensure that Brazil can meet its target of a primary budget surplus of $81 billion.

The primary budget surplus of a government is the surplus excluding interest payments on its outstanding debt.

Public debt in Latin America's leading economy amounts to 36.5 percent of gross domestic product and Mantega said the goal is to bring it down to 35 percent at the end of this year.

"The increase in investment is the engine of growth in Brazil," added Mantega, who also insisted that "social programs would be strengthened."

The cuts announced Wednesday are higher than the $30 billion slashed last year just after President Dilma Rousseff took office.

For 2012, the government had been banking on five percent GDP growth, to be fueled by tax rebates, industry incentives as well a cut in interest rates, in addition to an increase in the minimum wage on January 1 to the equivalent of $332 per month from $294.

But a report from the economy ministry published Monday forecast lower growth of 4.5 percent.

The report says GDP growth should rise to 5.5 percent in 2013 and six percent in 2014, the year when the world's sixth largest economy is to host the World Cup.

The ministry also forecast that inflation should reach 4.7 percent this year, down from 6.5 percent last year.

The government stressed that it plans a massive increase in public and private investments in infrastructure and industry projects over the next four years.

The government program to boost growth should attract $580 billion by 2016, mainly in energy projects, housing and infrastructure.

The ministry report indicated that planned investments in transports, ports and airports before the World Cup amount to $17.5 billion.

Brazil registered zero GDP growth in the third quarter of 2011 compared to the second quarter, official statistics showed.

And the Brazilian Institute of Geography and Statistics reported in early December that the economy had grown just 3.7 percent in the last 12 months.

Brazil's lower growth last year was a consequence of the global economic slowdown and followed GDP expansion of 7.5 percent in 2010.