Administration presents its 2012 budget

Yesterday, August 31, the minister of Planning, Miriam Belchior, rolled out the Dilma Rousseff administration’s budget for next year (“Orçamento Geral da União de 2012”). As is customary, the budget was made public at a ceremony when the minister presented a copy to congressional leaders.

In the 2012 budget, the government intends to increase spending (“investimentos”) by 8.3%, to a record R$165.3 billion. The money will come from its Fiscal and Social Security Budget (R$58.5 billion) (“Orçamento Fiscal e da Seguridade”) and the budget of state-run enterprises (“orçamento das estatais”) (R$106.8 billion).

The budget sets the target for 2012 inflation, as measured by the Broad Consumer Price Index (“IPCA”), at 4.8% (the target in 2011 was 4.5% -always plus or minus two percentage points).

The 2012 budget also sets a GDP growth target of 5%, an average exchange rate of R$1.64 to the dollar. At tje same time, the country’s base interest rate, the Selic, is projected to be an average 12.5% and, finally, the country’s nominal salary mass is expected to grow 9.8% next year.

As for the minimum wage, it will rise significantly as per the rules set governing adjustments. Thus, with GDP growth in 2010 of 7.5%, plus inflation as measured by the National Consumer Price Index (“INPC”), it will be around 13.6%, going from R$545 to R$619.

With regard to the government’s principal development project, the Accelerated Growth Program (“PAC”), the budget sets aside R$111.3 billion for it. R$42.5 billion will come from the government (the Fiscal Budget) and the remaining R$68.7 billion from the state-run-enterprise budget (that includes, for example, investments by Petrobras, expanding generation capacity in the electricity sector (hydroelectric power plants and so forth) and loans to agriculture by state run banks, such as Banco do Brasil).

The 2012 budget also raises the government’s primary surplus target by R$9 billion to a record R$139.8 billion, compared to R$128 billion this year.

The budget’s total of outlays and income is R$2.1 trillion. As for outlays by the government, 89% of them are non-discretionary, that is mandatory. Out of the discretionary spending, 31.6% is earmarked for Health (R$71.7 billion, an increase of R$9.3 billion from 2010); 19.2% for the PAC, 13.8% for Education (R$33.3 billion, up from R$25 billion) and 11.6% for the Brazil Without Misery program (R$25.7 billion, an increase of R$8.9 billion). Finally, outlays by the government for the World Soccer Cup in 2014, the Olympic Games in 2016 and the Copa das Confederações will rise from R$400 million this year, to R$1.2 billion in 2012.