Brazil Government Posts Biggest Primary Budget Deficit on Record

  • Gap was 21.3 billion reais, worse than all but one estimate
  • Result underscores challenges facing new finance minister

The central government’s primary budget deficit last month was the worst on record and wider than all but one forecast made by analysts, underscoring the challenges facing Brazil’s Finance Minister Nelson Barbosa as he struggles to win investor confidence.

The gap, which excludes interest payments as well as municipalities and government-run companies, was 21.3 billion reais ($5.5 billion) in November, the Treasury said Monday. The median forecast of 18 analysts surveyed by Bloomberg was for a deficit of 14.1 billion reais, with estimates ranging from a gap of 8.3 billion reais to a deficit of 22 billion reais.

Minister Barbosa entered office last week pledging to carry out his predecessor Joaquim Levy’s belt tightening programs in order to reverse the primary budget deficit next year. But his task may become increasingly difficult amid a faltering economy, dissent in Congress and pressure from some members of the ruling party to focus on stimulus measures.

The real had depreciated 1.6 percent on news last week that Barbosa would take Brazil’s top economic job, as investors feared he will ease up on fiscal austerity. The currency appreciated 2.13 percent in mid-afternoon trading Monday on dollar inflows from local exporters.

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