Brazil’s north faces wider gap with spend­ing freeze

Kuwait Times - - BUSINESS -

In Salgueiro, a cross­roads town in one of the poor­est cor­ners of arid north­east­ern Brazil, Maria Ade­laide dos San­tos’s small shop sell­ing shoes and clothes springs to life for just a few days at the end of each month. Amid Brazil’s worst re­ces­sion in a cen­tury and a long drought that has crushed hopes of mak­ing this an agri­cul­tural cen­ter, dos San­tos sur­vives thanks to a trickle of cus­tomers when gov­ern­ment em­ploy­ees get paid.

“Un­em­ploy­ment here is very bad and these pub­lic ser­vants are all we’ve got now. There are no fac­to­ries here,” said the 48-yearold mother of three. Dur­ing a decade-long com­modi­ties boom that pushed Brazil’s av­er­age yearly growth rate to 4 per­cent, the coun­try be­came a poster child in the global fight against poverty.

Heavy spend­ing by the left­ist Work­ers Party gov­ern­ment helped lift more than 26 mil­lion Brazil­ians out of poverty - more than a tenth of the pop­u­la­tion and mostly in the un­der­de­vel­oped north.

But the col­lapse of the boom two years ago has hit pub­lic cof­fers and as­phyx­i­ated poor towns like Salgueiro. In an ef­fort to tackle Brazil’s bloated deficit, cen­ter-right Pres­i­dent Michel Te­mer is now push­ing through Con­gress an un­prece­dented 20-year limit on fed­eral spend­ing, ex­pected to be ap­proved next month.

In re­gions like the parched Sert„o of the north­east with scant prospects for pri­vate in­vest­ment, there are grow­ing fears that the cuts could stoke un­em­ploy­ment and worsen the gap be­tween rich and poor in what is al­ready one of the world’s most un­equal coun­tries. As in most of Brazil’s least-de­vel­oped re­gions, the gov­ern­ment here is the main provider not just of ed­u­ca­tion and health­care but also credit and jobs.

In more than half of Brazil’s 27 states, pub­lic sec­tor salaries ac­count for more than one-fifth of eco­nomic out­put. In Brazil’s north­ern­most states of Ro­raima and Amap·, in the Ama­zon, the state ac­counts for nearly half of the econ­omy while in the south­ern state of S„o Paulo, Brazil’s rich­est and most pop­u­lous, pub­lic salaries ac­count for just 10 per­cent of GDP.

“This spend­ing cap is ter­ri­ble,” said the mayor of Salgueiro, Mar­cones LibÛrio de S·. “All of the North­east is very poor. Many cities are out­right bank­rupt.”

While push­ing ahead with spend­ing cuts, Te­mer has ruled out re­duc­tions in the gov­ern­ment’s flag­ship wel­fare pro­grams Bolsa FamÌlia, a monthly al­lowance of up to 336 reais ($100) to im­pov­er­ished fam­i­lies that won in­ter­na­tional ac­claim for its suc­cess in fight­ing poverty. — Reuters

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