Brazil's public accounts
continued to improve in July as a robust economy drove tax
revenues higher and the government maintained fiscal discipline
as a way to weather the global financial crisis.
Brazil posted a July consolidated primary budget surplus
BRPSPS=ECI, which includes federal and regional governments
and state companies, of 13.8 billion reais ($8.57 billion).
It is the best result ever for the month of July and in
line with the median forecast of analysts surveyed by Reuters.
Estimates for a surplus ranged from 9.6 billion to 14.7 billion
reais.
While economic growth has slowed from 7.5 percent last year
to an expected level just below 4 percent this year, overall
economic activity was still generating more revenue than 12
months ago, Tulio Maciel, head of economic research at the
central bank, told a news conference.
Tax revenue from January through July was up 22 percent
over last year, Maciel said, highlighting strong gains in
industrial taxes.
With fewer one-off corporate tax payments and more budget
spending, surpluses should narrow in coming months but still
exceed the year-end target, Rosenberg Associados, a Sao
Paulo-based consultancy said in a research note.
Analysts look at a country's primary budget surplus as a
gauge of its ability to service its debt.
Brazil's government ramped up spending last year ahead of
October presidential elections, but President Dilma Rousseff
has slashed expenditures since taking office on Jan. 1 to try
and keep inflation under control.
"Brazil's fiscal situation is returning to normality after
two years of crisis," Maciel said in reference to the 2008/09
financial crisis during which Brazil adopted costly economic
stimulus measures.
In the 12 months through July, the primary surplus, which
excludes debt service payments, was equivalent to 3.83 percent
of gross domestic product, up from a previously reported 3.54
percent through June.
Critics say Rousseff is cutting mostly investments and not
government fat to meet targets.
"This is a temporary fix. There are no signs of lasting,
structural spending cuts," said Mauricio Rosal, chief Brazil
economist with Raymond James in Sao Paulo.
WELCOME NEWS FOR ROUSSEFF
Still, the figures will be welcome news for Rousseff, whose
austerity measures have otherwise generated discontent among
legislators, middle class voters and others who have seen their
budgets cut.
The Rousseff administration hopes to showcase its healthy
public accounts on global financial markets to contrast with
debt troubles in the United States and in the euro zone.
Finance Minister Guido Mantega has been urging legislators
to refrain from approving costly salary hikes as well as other
discretionary spending.
Brazil's total public sector debt was equivalent to 39.4
percent of GDP in the month, down from 39.8 percent in June.
The government next week is expected to present an austere
2012 budget, slashing hopes that Rousseff may open the tap on
public spending after an initial year of austerity.
"She will tell allies on Monday that the global (economic)
crisis will demand a tight budget next year as well," a
government source with direct knowledge of the issue, said.
Continued fiscal discipline will also be necessary for the
government to tackle stubborn inflation, which climbed to 7.1
percent in the 12 months through mid-August for the first time
since 2005.
The central bank has raised interest rates five times this
year to 12.5 percent, the highest rate among major economies.
Higher rates push up debt servicing costs, and in July
pushed the nominal budget deficit to 5.0 billion reais. The
deficit was 5.6 billion reais the previous month.
