* Rousseff expands Cabinet to 39 members to widen coalition
* Social expenditure rose sharply at expense of investment
* Economists say tax burden too high at 36 pct of GDP
By Anthony Boadle
BRASILIA, May 9 President Dilma Rousseff added a
new minister to her Cabinet on Thursday, further enlarging a
federal government whose rapid growth since her leftist party
came to power a decade ago has increased Brazil's heavy tax
Rousseff, who is seeking re-election next year, swore in
Guilherme Afif Domingos to head the newly created Ministry of
Micro and Small Businesses, the country's 39th ministry.
When civilian rule replaced military dictatorship in 1985,
there were only 17 ministries in Brasilia. The number of Cabinet
posts has almost doubled since the Workers' Party took office
under former President Luiz Inacio Lula da Silva in 2003.
Brazil's Cabinet now has twice the number of ministers that
Organization of Economic Cooperation and Development nations
have on average.
Rousseff said the new ministry's priority would be to cut
bureaucracy and red tape that strangle small businesses as her
government strives to inject new life into the fragile recovery
of the world's seventh largest economy.
Political analysts say, however, the main reason is to widen
support for the president's re-election by bringing Afif
Domingos' fast-growing PSD party, the third largest in Congress,
into her unwieldy 18-party coalition.
"The number of ministries is a result of the president's
political need to accommodate such a variety of different
parties," said Octavio Amorim Neto, a political science
professor at Brazil's Getulio Vargas Foundation.
Their leaders range from former communists to conservative
evangelicals, such as Bishop Marcelo Crivella who became fishing
minister last year, even though he admitted publicly to
understanding little about fishing.
Even Rousseff's top adviser from the business sector,
steelmaker Jorge Gerdau, criticized the new ministry, saying the
government could operate with "half a dozen" key ministries and
did not need 39.
"But as the number of parties grows, this is all but
impossible," Gerdau, who heads an advisory group on making
government more efficient, told the Folha de S.Paulo newspaper.
Officials in Rousseff's administration say that while the
federal government has grown steadily in size, revenues have
risen even faster.
But economists warn that the increasing cost of government
is to blame for Brazil's tax burden, which at 36 percent of GDP
is close to the average for rich OECD countries, but far too
high for an emerging middle-income nation, economists say.
Over the past decade, Brazil greatly expanded social
programs to lift more than 30 million Brazilians from poverty
through conditional cash transfers, to the point where spending
on social assistance, pensions, health and education now account
for 91 percent of the government's current expenditure.
That has come at the expense of public investment in
Brazil's deficient infrastructure that has become a costly
hurdle to economic growth, said economist Mansueto de Almeida of
the government think tank IPEA. Add Brazil's high taxes and
labor costs and that has undermined Brazilian industries'
ability to compete in the world, he said.
The once-booming Brazilian economy grew a mere 0.9 percent
last year and the government has resorted to a barrage of tax
breaks, lower interest rates and other incentives over the past
two years to try to restore solid growth, so far to no avail.
De Almeida said the Rousseff government had begun to see the
tax burden as a problem, but had no solution, especially since
it was cranking up spending as it enters an election year.
"We have a large government that increased the number of
ministries, expanded social spending, but wants to increase
investment to grow: something has to give," he said.