A Panicked Brazil Promises Billions In Austerity, Does 180 On Budget After Downgrade

Exactly two weeks after conceding that a primary surplus was no longer in the cards after budget data in July came in meaningfully worse than expected, Brazil is scrambling to restore some semblance of confidence in the government’s ability to close a yawning budget gap by implementing austerity even as political turmoil has made embattled FinMin Joaquim Levy’s life a living hell of late.
On the heels of a painful S&P downgrade, Brazil now says it plans to enact some BRL26 billion in primary spending cuts for the 2016 budget on the way to achieving in a primary surplus that amounts to 0.7% of GDP.
In other words, a complete 180 from what the government said prior to the downgrade.
Needless to say, reconciling tax increases and budget cuts with the party mandate won’t be easy. ‘Budget cuts and tax increases discussed by govt in response to Brazil’s credit rating downgrade don’t agree with central tenets of Workers’ Party,’ Bloomberg notes, citing an unnamed party official.
Particularly divisive will be the CPMF revival which isn’t likely to be approved. Here’s Bloomberg with a bit more on the announcement:

This post was published at Zero Hedge on 09/14/2015.