* Primary surplus 104.951 bln reais vs 139.8 bln reais goal
* 22.252 bln reais Dec surplus vs 5.5 bln reais Nov deficit
* Gov't considering changes to primary goal to boost economy
By Alonso Soto and Luciana Otoni
BRASILIA, Jan 30 Brazil failed to reach its
primary budget surplus goal last year in an expected shortfall
that has raised worries about the government's commitment to the
fiscal discipline that helped the Latin American giant secure a
decade of economic stability.
Brazil posted a primary surplus of 104.951 billion reais
($53 billion) last year, the equivalent of 2.38 percent of gross
domestic product, according to central bank data released on
Wednesday. That is way below the annual target of 139.8 billion
reais, or about 3.1 percent of GDP.
For months officials have said the country was not going to
meet the target after the government handed out billions of
dollars in tax incentives last year to revive an economy
struggling with high production costs and a fragile global
As the recovery continues to disappoint, the government of
President Dilma Rousseff is debating whether to lower the
primary surplus target to free up funds for investment in a bid
to bolster the economy and bring clarity to public accounts.
Brazil posted a surplus of 22.252 billion reais
in December after a deficit of 5.515 billion reais in November.
The primary budget surplus is a gauge closely watched by
investors because it measures a country's ability to service its
debt. It represents the excess of revenue over expenditures
before interest payments are taken into account.
The government has resorted to alternative accounting
methods to meet its primary surplus target on paper. Brazilian
law allows the government to exclude some public investments
from its accounts to reach the target, though that methodology
is not recognized by some foreign observers like the
International Monetary Fund.
In contrast, the government surpassed its primary target in
2011, posting a primary budget surplus of 128.71 billion reais
or 3.11 percent of GDP. That year the government even increased
its target by 10 billion reais to show its commitment to fiscal
CHANGES TO TARGET
Treasury Secretary Arno Augustin said on Tuesday that the
government was considering making "improvements" to the target,
but did not say if that meant the target would be formally
lowered. The government would need to introduce new legislation
to lower this year's primary goal, which was set at 155.9
billion reais, or 3.1 percent of GDP.
The government is planning to cut more taxes in a bid to
support a still sluggish recovery in Latin America's top
economy. The slow-moving economy will also likely cut hit tax
collection this year even as the government goes
after big Corporate tax payers to make up for loss revenue.
In an interview with Reuters, Augustin said that the
government could even consider scraping the primary target for a
goal based on its overall budget balance.
Brazil's overall budget balance, which includes interest
payments, posted a surplus of 3.15 billion reais in December
from a deficit of 21.84 billion reais in November. In December
of 2011, the government posted a overall deficit of 18.64
Last year the country posted an overall budget deficit of
108.9 billion reais, equivalent to 2.47 percent of GDP.
Most analysts and even rating agencies agree that a
reduction of the target is unlikely to jeopardize the country's
solid finances, which stand in stark contrast to those of highly
indebted countries in the euro zone and the United States.
Even after failing to meet the target last year the
government was still able to cut its debt burden to a new low of
35.1 percent of GDP in 2012. In a bit over a decade Brazil has
been able to nearly halve its debt burden due to the high
surpluses and a buoyant economy.
However, some fear relaxing the target could trigger
spending pressures from public union workers and legislators who
might take it as a green light to spend more ahead of next
year's general elections. That would fuel inflation, which is
already speeding up.
Finance Minister Guido Mantega opposes the idea of formally
lowering the target, government sources recently told Reuters.
Instead he prefers to continue the creative accounting that
Brazil has been using to meet the target on paper.