Bloomberg News

Brazil Exceeds Its Primary Budget Surplus Target for 2011

February 01, 2012

(Updates to add central bank comment in fourth paragraph)

Jan. 31 (Bloomberg) -- Brazil exceeded its fiscal target in 2011 as government savings offset higher costs to service debt in Latin America’s largest economy.

The federal and local governments, including state companies, posted a primary surplus of 128.7 billion reais ($72.9 billion) or 3.1 percent of gross domestic product, the central bank said today in a report distributed in Brasilia. Its target was 127.9 billion reais. Including interest payments, there was a deficit of 108 billion reais, or 2.6 percent of GDP, the highest ratio since 2009.

President Dilma Rousseff’s administration will maintain a rigorous fiscal policy this year to allow the central bank to further reduce its benchmark overnight rate, Finance Minister Guido Mantega said earlier this month. The government will cut enough of the 2012 budget to ensure the country meets the primary surplus target of 139.8 billion reais, he said.

“In this international scenario a solid fiscal situation makes the country stand out,” Tulio Maciel, head of the central bank’s research department, told reporters in Brasilia today.

Higher average interest rates pushed up debt payments in 2011 to the equivalent of 5.72 percent of GDP, the highest since 2007. Falling rates will reduce that ratio to 4.3 percent in 2012, Maciel said.

Lower Rate

Policy makers, led by central bank President Alexandre Tombini, reduced the benchmark interest rate by half a percentage point in each of their four past meeting, bringing the Selic down to 10.5 percent.

The strong primary surplus result -- up from 2.7 percent in 2010 and 2 percent in 2009 -- helped push net debt to 36.5 percent of gross domestic product in December from 39.1 percent a year earlier, the central bank said today.

The yield on interest rate future contracts maturing January 2013 rose one basis point, or 0.01 percentage point, to 9.52 at 2.43 p.m. Brasilia time. The real weakened 0.2 percent to 1.7514 per U.S. dollar.

Traders are wagering the central bank will reduce the benchmark interest rate to at least 9.5 percent by July, interest rate futures show.

--Editors: Harry Maurer, Richard Jarvie

To contact the reporters on this story: Raymond Colitt in Brasilia Newsroom at; Andre Soliani in Brasilia at

To contact the editor responsible for this story: Joshua Goodman at

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