Brazil: Spending cuts & raised taxes will help economy recovery

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The government of Brazil has announced that $7 billion will be cut from Brazil’s spending budget in 2016, something that aims to cover the ‘economic black hole’ that currently exists in the country’s budget.
At the same time, the Brazilian government is planning to raise another $8 billion from taxes. They will reintroduce an unpopular financial transaction tax that was cancelled eight years ago. These measures hope to move the country out of the recession.

As a result of these announcements, President Dilma Rousseff’s popularity fell by 8%. Another reason for the drop in popularity is that these measures were announced by Planning Minister Nelson Barbosa and Finance Minister Joaquim Levy, without the President being present.

As these measures are aiming to improve the Brazilian economy, the Finance Minister said this will come at the expense of some on-going infrastructure projects; such as those designed for the benefit of poorer Brazilians like ‘My House My Life’ project will also be affected.

Financial Analysts are not impressed with the package, stating that it was unlikely to do so much to bring public finances to back to good health.

‘We’re left with the impression that the government is now scraping the barrel in an effort to plug its budget hole’

– A Representative from Capital Economics stated.