Brazil’s Primary Deficit to End Year Below R$80 Billion, Guedes Says

RIO DE JANEIRO, BRAZIL – The inflow of extraordinary income, mainly in the second semester, will lead the central government – National Treasury, Social Welfare and Central Bank – to end 2019 with a primary deficit of R$80 billion (US$20 billion), announced the Minister of Economy, Paulo Guedes, in a press conference at the Planalto Palace in Brasília, yesterday, November 18th.

However, the target for the year will be maintained at R$139 billion, almost double the projected deficit.

“From the fiscal point of view, 2019 was a year well above expectations,” Guedes said.

The minister also noted the cooperation of the Executive with the Legislative, which approved reforms such as the Social Welfare, with the Federal Audit Court (TCU), which authorized the acceleration of the transfer of oil rights auctions, as well as the Federal Supreme Court (STF), which allowed the sale of subsidiaries of state-owned companies without the need for Congressional voting.

The primary deficit represents the negative result of the government’s accounts unaffected by the payment of interest on the public debt. The 2020 Budget provides for a target deficit of R$124.1 billion for the central government.

However, special finance secretary Waldery Rodrigues said the government’s accounts are likely to close “tens of billions of reais” better than projected for next year. Even with the 2020 deficit lower than expected, Rodrigues assured that the government will also keep the fiscal target for next year.

Optimism

According to Rodrigues, the revival of economic activity, which may be reflected in revenue collection, warrants optimism for 2020. He further mentioned the anticipation of dividends from state-owned companies and the prospect of auctioning the transfer of rights in the offshore oilfields of Atapu and Sépia, the pre-salt exploration areas that were not sold at the auction held on November 6th.

Next week, the government will submit to Congress a text modifying the 2020 Budget, including the effect of measures sent this year, and revising expenses that will make room for the spending ceiling. The figures, however, have not yet been provided.

Late last month, Treasury Secretary Mansueto Almeida explained that upholding the spending ceiling does not require changing the target. The reason for this is that the growth of government spending would remain constrained.

With the allocation of funds resulting from the transfer of oil rights auctions to states and municipalities and the payment to Petrobras for the surplus barrels of oil in the pre-salt layer, the 2019 Budget will close the year with a reserve of R$18.12 billion.

According to Federal Budget Secretary George Soares, a portion of this reserve will be used to pay off extraordinary debts, but the majority will help reduce the primary deficit – a negative result of the government’s not including interest on public debt.

Source: Agência Brasil

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