Brazil could freeze up to $25.5bn in spending

BRASILIA: The Brazilian government could freeze up to 80 billion reais ($25.56 billion) in planned spending this year to reach its fiscal savings target, a government official said on Tuesday. A stagnant economy and dwindling tax revenues have complicated President Dilma Rousseff's efforts to balance the government's accounts and avoid losing Brazil's investment grade rating.

The official, who spoke on condition of anonymity, said the government was aiming for a freeze of 60 billion reais, but it could add 20 billion reais in discretionary spending included by lawmakers in the 2015 budget. The final size of the freeze hinges on the approval in Congress of measures to reduce about 18 billion reais in unemployment and pension benefits this year, the official said.

The government has until late May to decide on the freeze, which is a sign of its commitment to fiscal austerity. Resistance to Rousseff's unpopular belt-tightening measures has raised doubts about her resolve to press ahead with the hefty budget cuts to restore investor confidence in Latin America's largest economy.

Freezing pork barrel spending could further fray Rousseff's tense relations with her coalition allies in Congress as the government scrambles to block bills that could threaten its fiscal savings target.

One of them is a labor outsourcing bill that is scheduled to be put to the vote in the Chamber of Deputies later on Tuesday. The government believes it could slash tax revenues by 20 billion reais, said Carlos Zarattini, a congressional leader in Rousseff's Workers' Party. After meeting Rousseff, the leaders of the government's alliance in Congress agreed to avoid voting on legislation that could impact the country's finances, her chief of staff Aloizio Mercadante said on Tuesday.

Mercadante acknowledged, however, that lawmakers could change the measures that limit unemployment and pension benefits.

Finance Minister Joaquim Levy convinced lawmakers last week to delay approval of a bill that will reduce the debts of Brazilian states debts and shrink federal government revenues.

Levy, a fiscal conservative and former banking executive, has raised taxes and limited public spending to meet a primary budget surplus of 1.2 percent of gross domestic product.

But fiscal accounts have continued to deteriorate. Brazil posted an unexpected primary deficit in February, widening the gap to the equivalent 0.69 percent of GDP in the 12 months through that month.

Last year the government froze 44 billion reais.