By Luciana Otoni
BRASILIA Feb 28 Brazil's consolidated primary
budget surplus narrowed in January from a year ago, marking a
weak start for the government's effort to boost savings and
regain credibility with investors this year.
The primary budget surplus, which represents the public
sector's net revenues over expenditures before debt payments,
totaled 19.921 billion reais ($8.53 billion) in January, down
from a surplus of 30.251 billion reais in the same month last
The markets had expected a surplus of 21.2 billion reais in
The Brazilian government's budget is undergoing close
scrutiny from investors after President Dilma Rousseff promised
to rein in public spending to avoid a downgrade by credit
ratings agency Standard & Poor's.
Earlier on Friday, the central government posted a primary
budget surplus of 12.954 billion reais ($5.55 billion) in
January, narrower than the December surplus of 14.5 billion
reais. The central government result includes federal
ministries, the central bank and the social security system.
"The government got off on the wrong foot with this result,"
said Flavio Serrano, senior economist with Espirito Santo
Investment Bank in Sao Paulo. "It was a disappointing result
that harms government efforts to regain the trust of investors."
The weak fiscal result indicates that the government likely
withheld payments and transfers to municipalities to bolster its
performance in December, Serrano said.
Both Brazil's currency and stocks dropped on
Friday while yields on interest rate futures rose amid
market disappointment with the fiscal results.
Brazil's fiscal balance of payments has deteriorated rapidly
under Rousseff amid a slew tax breaks combined with increases in
government spending in an effort to revive the economy.
Rousseff has relied on billions of dollars in extraordinary
revenues from corporate tax settlements to make up for the
country's weakened fiscal position, a situation that has raised
worries about the actual state of the country's finances.
Shrinking primary surpluses have widened the country's
overall budget deficit, which includes interest payments, to a
three-year high of 3.28 percent of gross domestic product. In
2012, the deficit was 2.48 percent of GDP.
Brazil's overall deficit totaled 10.478 billion reais in
TARGET IN JEOPARDY?
Last week, the Rousseff administration pledged to freeze 44
billion reais ($18.8 billion) in spending to meet a more
"realistic" fiscal savings goal this year, equivalent to 1.9
percent of GDP. Still, most economists in a Reuters poll said
the government would likely miss that target.
In the 12 months through January, the primary surplus was
equivalent to 1.67 percent of GDP, down from 1.9 percent of GDP
in December. The primary budget surplus is a gauge of debt
Treasury chief Arno Augustin said an increase in
expenditures and transfers to local governments dragged down the
primary surplus result in January, but reiterated that the
administration is committed to meeting its annual goal.
"It is wrong to say that the fiscal result in January makes
it more difficult for us to deliver the goal," Augustin told
reporters in Brasilia.
"This result is in line with our budget plan. It is by no
means an indication of the start of a negative trend."
The government has fallen short of its consolidated primary
surplus target in the past two years.
The rapid erosion of Brazil's finances have raised fears
that the country may not be able to keep reducing its overall
debt burden, which was more than halved over the last decade.
The public sector's net debt was equivalent to 33.3 percent
of GDP in January, down slightly from 33.53 percent of GDP in