(Adds Rousseff comments on position cuts, paragraph 4)
By Alonso Soto
BRASILIA, Aug 24 (Reuters) - Brazil will sharply pare back the number of government ministries after years of expansion, the administration said on Monday, in a move to show wary markets President Dilma Rousseff’s commitment to an unpopular austerity plan.
Planning Minister Nelson Barbosa said the government will cut 10 of its 39 ministries to make the state more efficient, but did not specify how much the government could save. He said the government will reveal more details on Aug. 31.
The reduction of the cabinet posts could further complicate Rousseff’s relations with political parties of her unwieldy alliance in Congress. The president has used top posts to help form her coalition.
Rousseff said in an interview with Estado de S. Paulo and other daily papers that 1,000 out of 22,500 politically appointed positions would be cut as a result. The government will specify which ministries will be dropped by September, she said.
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 credit rating. Opponents have called for deeper budget cuts after years of heavy spending during her first term in office.
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.”
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. That is 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.
Lawmakers, including members of Rousseff’s own Workers’ Party have resisted her unpopular efforts to cut government spending and raise taxes. Congress has watered down belt-tightening bills that reduce the fiscal cost of pensions and unemployment benefits.
While Brazil’s spending with personnel is considered high among emerging market peers, most of the government’s budget goes toward obligatory outlays tied to education, health, pensions and social programs. (Additional reporting by Maria Carolina Marcello; Writing by Alonso Soto; Editing by David Gregorio and Cynthia Osterman)