Bloomberg News

Brazil Posts Above-Target Primary Surplus for 2011

January 29, 2012

(Updates with comments from analysts in the seventh paragraph.)

Jan. 27 (Bloomberg) -- Brazil’s central government exceeded its budget target for 2011 by posting a surplus excluding interest payments of 93.5 billion reais ($53.7 billion) for the year.

The central government had a primary surplus of 2 billion reais in December after a revised 4.71 billion-real surplus in November, the Treasury said in a statement distributed in Brasilia today. The monthly figure pushed the 2011 total up above its target of 91.7 billion reais.

Treasury Secretary Arno Augustin said today the government expects to meet its 2012 primary budget surplus target of 97 billion reais. The central bank this month said there is a “high” chance its benchmark rate will drop below 10 percent, signaling it remains focused on spurring growth.

Yields on interest-rate futures contracts fell on bets the central bank will cut borrowing costs below 10 percent in the first half of 2012.

The yield on the contract due in January 2013 fell five basis points, or 0.05 percentage point, to 9.61 percent at 5:14 p.m. in Sao Paulo, bringing the weekly drop to 21 basis points. The real advanced 0.5 percent to 1.7399 per U.S. dollar, from 1.7491 yesterday, extending its gain this week to 0.90 percent.

Consumer prices will rise 5.29 percent this year, according to the median forecast in a Jan. 20 central bank survey of about 100 economists published this week. The bank targets an annual inflation rate of 4.5 percent, plus or minus two percentage points.

The central government needs to go beyond the public sector fiscal target to open up room for central bank interest rate cuts, Flavio Serrano, senior economist at Espirito Santo Investment Bank, said in a telephone interview from Sao Paulo.

Serrano said that it will be “ very difficult to achieve the promise of increasing investment and, at the same time, reach the full primary surplus target´´ of 3.1 percent of gross domestic product this year.

He also expects the central government’s budget performance be come in slightly below the target because is possible to discount some investment.

Roberto Padovani, chief economist at Votorantim Corretora, said he expects a 60 billion-real cut to federal expenses.

“On the other hand, Brazil will collect some extraordinary taxes and concessions for airports, roads and energy assets. That is the way to increase investment, probably,´´ Padovani said.

--With assistance from Dominic Carey in Sao Paulo. Editor: Robert Jameson

To contact the reporter on this story: Arnaldo Galvao, in Brasilia at

To contact the editor responsible for this story: Francisco Marcelino at

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