Brazil to cut government ministries, costs to show austerity

Reuters News
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Posted: Aug 24, 2015 11:38 AM

BRASILIA (Reuters) - Brazil's government announced on Monday it will slash the number of ministries and reduce its spending, in an effort to show commitment to austerity that could be politically costly for President Dilma Rousseff.

Planning Minister Nelson Barbosa said the administrative overhaul aims to make the state more efficient, but did not specify how much the government could save. Barbosa added the government will cut 10 of its 39 ministries and that more details of the measure will be unveiled on Aug. 31.

Brazil's ruling Workers' Party has been criticized for bloating the size of government. Since it took office in 2003, the number of ministries in Brasilia has ballooned from 26 to 39, more than double the 15 the Cabinet-level departments used to govern the United States.

The distribution of ministry jobs has been crucial for the Workers' Party to secure coalition partners needed to govern. The reduction in the number of ministries will likely deepen dissatisfaction among Rousseff's allies, mainly the PMDB party which is preparing to abandon the coalition to launch its own presidential candidate in 2018.

It was "clearly designed to demonstrate commitment to austerity to financial markets," said Neil Shearing, chief emerging market economist with Capital Economics in New York.

"The problem is that trimming ministries means trimming ministers, so the political obstacles will be high."

Economists have said reducing ministries would save little at a time when Rousseff is scrambling to meet already-reduced fiscal targets and avoid losing Brazil's investment-grade rating.

(Reporting by Maria Carolina Marcello; Writing by Alonso Soto; Editing by W Simon)