Brazil’s Primary Surplus to Drop Below 4% of GDP

Brazil posted a 4.32% of GDP primary surplus in 2006 compared to 4.83% in 2005 revealed the Brazilian Central Bank. The savings are equivalent to US$ 41 billion.

Last year was the fourth running that Brazil under President Luiz Inácio Lula da Silva managed a primary surplus above 4%; in 2003, 4.25%; in 2004, 4.59%; in 2005, 4.83% and last year's 4.32%.

On taking office in 2003, the socialist Lula administration raised the primary surplus target from 3.75% to 4.25% to give markets a clear fiscal austerity message besides averting any chances of a debt moratorium scare.

Last year's primary surplus was made up of 2.46% by the federal government, Central Bank and Social Security system; states and municipalities contributed with 0.94% and government owned corporations, 0.91%.

However the savings were insufficient to cover total debt interest payments which last year totaled 73.4 billion US dollars equivalent to 7.66% of GDP, but down from the 8.11% of GDP in 2005, points out the Central Bank.

The budget nominal result, including interest payments, registered in 2006 (an electoral year) a deficit equivalent to 3.35% of GDP compared to 3.28% in 2005.

For his second mandate which begun January 2007, Lula da Silva has talked about reducing the primary surplus 0.5 to the original 3.75% of GDP with the purpose of significant investments in housing, water and sewage works.

A project originally agreed with the IMF,but Brazil's Finance minister pointed out that in spite of the public works initiative the government will continue with its policy of reducing the debt/GDP relation, among other reasons because of lower interest rates as the country's risk rating improves.

Brazil's public debt (domestic and international) totaled at the end of December 2006 the equivalent of US$ 489.5 billion or 50% of the country's GDP compared to 51.5% of GDP in December 2005, according to the Central Bank.

Debt/GDP relation climbed to 55.5% at the end of 2002 to 57.2% at the end of 2003, but later dropped to 51.7% in 2004, 51.5% in 2005 and 50% in 2006.

The four-year plan presented by Lula on taking office for a second mandate estimates the relation to drop to 48.3% by the end of 2007 and by 2010 should be in the range of 39.7% of GDP.

The plan spurred by significant public and private investments in infrastructure also anticipates a progressive return to a balanced budget with the overall deficit dropping to 1.9% of GDP this year and 0.2% by 2010.

Although Brazil's growth in the first four years of Lula da Silva's administration was below that of other large emerging countries, (0.9% in 2003; 4.9% in 2004; 2.3% in 2005 and 2.7% in 2006), the announced plan forecasts 4.5% growth this year and 5% beginning 2008.

The political reading of Lula's development program for his second mandate, according to market analysts, shows a clear turn from the orthodox policies of former minister Antonio Palocci and is geared to satisfy "domestic industrial interests and the left wing hard core of the ruling Workers Party which blames meager economic growth to four years running of adjustment policies."

Mercopress

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brazil: Record Profit at Petrobras and a Little Help from Arab Building Boom

Brazil’s state-controlled oil and gas multinational Petrobras has just announced that it posted a ...

No Losers

The left had a very good showing in major cities. On the other side ...

Best-seller Books, Plays and Movies

By Brazzil Magazine Copenhagen—Scientists Niels Bohr, from Denmark and German Werner Heisenberg get together ...

Economists Expecting Brazil’s GDP to Grow 7.55% This Year

Brazil’s Central Bank survey of the Brazilian market (the Focus report) found financial consultant’s ...

Growing Rumors of Finance Minister’s Resignation Leave Brazil Singing the Blues

Latin American stocks were mixed, with Brazilian stocks slumping amid news reports that the ...

Brazil Considers Gulf Priority for Mercosur Economic Bloc

Negotiations for a free trade agreement with the Gulf Cooperation Council (GCC), the economic ...

Tears and Indignation Won’t Save Lula’s Job

The ongoing scandal involving allegations that the Workers Party (PT) paid bribes to members ...

Brazil Petrobras’ Production Reaches Over 2.3 Million Barrels a Day

Petrobras began operating this week a new oil rig with an estimated initial daily ...

Brazil: When Judges Go Beyond and Above the Law

The last days of the military regime (1964-1985) coincided with an incredible rise of ...