Brazil spending cap forces Temer government to rethink expenses

Reuters News
Posted: Mar 07, 2017 1:32 PM

By Anthony Boadle and Marcela Ayres

BRASILIA (Reuters) - Constrained by a spending cap enacted by his own administration, President Michel Temer's government is brainstorming to cut costs and squeeze more from a leaner federal budget.

Tens of thousands of civil servants will have to take regular taxis to get around Brasilia, the capital, because fleets of chauffeur-driven government cars will be eliminated. A centralized contract for power at government buildings will reduce the electricity bill by 20 percent.

Since Temer, a conservative, took over for impeached leftist Dilma Rousseff last year, his government pushed through a spending cap that for the next two decades limits expenditure increases to the rate of inflation. It has laid off more than 4,000 government employees and reduced the number of ministries from 36 to 28.

The belt-tightening was a matter of necessity as Brazil is grappling with its worst-ever recession and a fiscal crisis brought on by soaring expenses and plummeting tax revenues. A ballooning budget deficit has undermined business confidence and in 2015 cost Latin America's biggest economy its investment grade credit rating.

"If we don't balance our accounts it will become difficult to pay for basic health and education services," Temer warned advisers during a meeting broadcast by government television on Tuesday, urging them to rethink public spending.

To get the job done, Temer has appointed cost-saving task forces, whose leaders say that most opportunities lie in revamping procurement for 120 federal agencies.

"We have to buy more with less," said Marcelo Pagotti, the planning ministry's secretary for information technology. "Money is limited and needs are always growing."

In addition to slashing a government power bill of 2.2 billion reais ($707 million), officials are also rethinking purchasing of everything from software to pharmaceuticals for public clinics. The health ministry says it has saved 1.9 billion reais in seven months with new contracts for medicines.

"The key is buying in bulk to get wholesale prices," said Pagotti, who recently negotiated a 39 percent price reduction on 110,000 computers and monitors. A planned contract with Microsoft for shared technology across various ministries is expected to reduce software costs by 60 percent, he added.

Government officials say they can also save billions of reais by digitizing public services, thereby reducing costly and time-consuming lines and bureaucracy. In the age of the smart phone and biometric identity checks most public services in Brazil remain frustrating, lengthy ordeals involving multiple documents and procedures.

The planning ministry on Friday called for bids from companies to provide cloud services for data storage by all government agencies. The administration is moving to digitize public services through a single portal, hoping to simplify processes.

"The migration to a digital platform will bring immense savings for the government, as well as for the public in general," said Gleisson Rubin, the planning ministry's management secretary.

The platform will unify access to existing databases, from the federal tax department to the elections authority to the passport office. That will simplify verification of citizen data, Rubin said.

By eliminating the need for physical presence in government offices, online services can cut the cost of attending to each person by 95 percent, he said.

(Reporting by Anthony Boadle; Editing by Cynthia Osterman)