Brazil’s US$ 42 Bi Surplus Not Enough to Pay US$ 71 Bi Interest on Debt

Last year the Brazilian government saved US$ 42.279 billion (93.505 billion reais), equivalent to 4.84% of the Gross Domestic Product (GDP) estimated for the period.

This result exceeded the government’s primary surplus target for the year (what the government saves to repay debt interest) by US$ 4.838 billion (10.7 billion reais). The target was US$ 37.416 billion (82.75 billion reais), or 4.25% of the GDP.

According to Altamir Lopes, head of the Central Bank’s Economic Department, this is the biggest surplus since 1994, when it corresponded to 5.21% of the GDP.

Lope informed that part of the increase reflects the contribution of states and municipalities. "The results of regional governments were very positive," he remarked.

The state and municipal primary surplus, US$ 9.641 billion (21.323 billion reais, or 1.10% of the GDP), was the largest since the statistic began to be calculated, in 1991.

Federal government-run enterprises also achieved a record-breaking surplus last year, of US$ 7.433 billion (16.441 billion reais).

In 2004 the government’s primary surplus was US$ 36.675 billion (81.111 billion reais), equivalent to 4.59% of the GDP.

Debt Interest

In 2005, the interest on Brazil’s debt came to US$ 71.054 billion (157.145 billion reais), equivalent to 8.13% of the Gross Domestic Product (GDP).

Since the primary surplus came to US$ 42.270 billion (93.505 billion reais), there was a US$ 28.776 billion (R$ 63.641 billion) deficit in the nominal balance in 2005, after interest payments are subtracted.

Commenting on these figures, the head of the Brazilian Central Bank’s Economic Department, Altamir Lopes, said that "this is the highest interest ever" on the debt.

"This has to do with the behavior of the interest rate," Lopes affirmed, recalling that the policy of raising the benchmark interest rate (Selic) over the course of last year had adverse effects on the part of the debt pegged to the Selic, which is set by the Central Bank.

Lopes explained that the government’s program for financing the debt has led to a significant decrease in the part of the debt pegged to foreign currencies, while increasing the portion linked to the Selic. "Moreover, the accumulation of debt by itself implies greater interest expenditures."

ABr

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