Brazil posts first primary deficit for August in a decade

BRASILIA Mon Sep 30, 2013 2:23pm EDT

Brazil's President Dilma Rousseff participates in the launch of the Program Inova Company (Programa Inova Empresa) during a meeting of the Mobilization for Business Innovation (MEI) in Brasilia March 14, 2013. REUTERS/Ueslei Marcelino

Brazil's President Dilma Rousseff participates in the launch of the Program Inova Company (Programa Inova Empresa) during a meeting of the Mobilization for Business Innovation (MEI) in Brasilia March 14, 2013.

Credit: Reuters/Ueslei Marcelino

BRASILIA (Reuters) - Brazil posted its first primary budget deficit for the month of August in more than a decade, central bank data showed on Monday, pointing to a deterioration in the country's finances that is worrying investors and rating agencies.

Brazil posted a primary budget deficit of 432 million reais ($194.07 million) in August.

The primary budget balance, which represents the public sector's excess revenue over expenditures before debt payments, was expected to reach a surplus of 1.85 billion reais, according to the median forecast of 10 analysts surveyed by Reuters. The country had a primary surplus of 2.3 billion reais in July.

The primary balance is closely watched by investors because it measures a country's ability to service its debt. The government missed its primary surplus target in 2012 and will miss it again this year as a series of tax breaks aimed at reviving the economy hits revenues. The country posted a nominal budget deficit of 22.3 billion reais in August.

Rating agencies have warned that smaller primary surpluses could threaten the country's debt dynamic and trigger a credit downgrade in the future.

In the 12 months through August, the primary surplus was equivalent to 1.82 percent of gross domestic product, down from the 1.91 percent posted in July.

Even with deteriorating government finances, the public sector's net debt fell in August to 33.8 percent of GDP versus 34.1 percent the previous month.

($1 = 2.2260 reais)

(Reporting by Alonso Soto and Luciana Otoni; Editing by James Dalgleish)