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Brazil Said to Likely Miss 2013 Primary Budget Surplus Goal

Sept. 11 (Bloomberg) -- Brazil is likely to miss its fiscal target next year because of tax cuts and other stimulus measures introduced to boost growth, two government officials said.

The government’s initial estimates shows it is likely to take advantage of accounting rules allowing it to subtract certain investments from its primary budget surplus target next year, said the officials, who are familiar with the forecast though not authorized to discuss it publicly.

The government is seeking a budget surplus before interest payments next year of 155.9 billion reais ($77 billion), or about 3.1 percent of gross domestic product. Under Brazilian budget rules, the government can discount up to 25 billion reais next year to fund growth-boosting investments in infrastructure.

“There is no damage to the net debt-to-GDP ratio, but it increases the chances of the central bank reversing the monetary easing. We expect an increase in Selic in the middle of 2013,” said Jankiel Santos, chief economist at Banco Espirito Santo Investment bank, in a phone interview from Sao Paulo.

President Dilma Rousseff plans to announce 15.2 billion reais in tax cuts as part of a plan to boost economic growth to 4.5 percent next, Finance Minister Guido Mantega told reporters Aug. 30.

Keeping Options Open

Rousseff reduced today taxes on energy bills that will cost the government 3.3 billion reais a year, according to Treasury Secretary Arno Augustin.

The government did not reach its full fiscal targets in 2009 and 2010, according to data from the Finance Ministry. In 2009, it used a 400 million-real discount while in 2010, the discount was 8.3 billion reais due the fiscal performance in Brazil’s states and cities.

At the Aug. 30 presentation of the 2013 budget proposal, Mantega said there’s a possibility the government might discount 25 billion reais even as the budget guidelines law allows a 40 billion-real discount.

“We may discount or not,” Mantega said.

Brazil’s central bank, which lowered the benchmark interest rate to a record 7.5 percent last month, said its inflation outlook is based on a forecast that the government will fully meet the primary surplus goal, according to the minutes of its Aug. 28-29 meeting.

To contact the reporter on this story: Arnaldo Galvao in Brasilia Newsroom at; Andre Soliani in Brasilia Newsroom at

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

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