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Tuesday, September 8, 1998 Published at 22:37 GMT 23:37 UK

World: Americas

Brazil announces big budget cuts

The Brazilian stock market plummeted last week

Brazil has announced emergency budget cuts amounting to nearly $3.5bn to try to bolster its economy, which has been shaken by the financial turmoil in Russia and East Asia.

Foreign investors have pulled billions of dollars out of emerging markets like Brazil, causing heavy falls on the stock markets.

Steven Cviic reports on Brazil's economic measures
The cuts are mainly in social and infrastructure spending. Finance Minister, Pedro Malan, said the government would also establish tighter spending targets for the next three years.

The government also said it would ask Congress to approve a plan to reduce the growing fiscal deficit.

The measures come on the heels of the Central Bank's announcement last Friday that it will effectively raise interest rates by 50% in a bid to stem the exodus of dollars from Brazil.

The markets reacted to the new measures in lukewarm fashion, the Sao Paulo stock exchange closing slightly down on the day.

Election looming

The measures were announced less than a month before the country's general election.

[ image: President Cardoso: Swears to defend real]
President Cardoso: Swears to defend real
President Fernando Henrique Cardoso has always said he would not hesitate to take whatever action was necessary to defend the Brazilian currency, the real.

However, the BBC Brazil correspondent, Stephen Cviic, says the measures fall far short of a rigorous austerity programme, and appear to be more of a holding operation designed to tide the government through the electoral period.

They have been criticised by some analysts as not going far enough.

An economist from the left-wing opposition said the measures would soon be swallowed up by the higher interest payments that the government will have to make on its debt.

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