UPDATE 3-Brazil 2009 primary budget surplus hits 8-year low

* Brazil 2009 primary budget result weakest since 2001

* 2009 primary surplus equal to 2.06 pct of GDP

* December primary surplus lower than expected
(Adds central bank comments and debt figures)

By Isabel Versiani and Ana Nicolaci da Costa

BRASILIA, Jan 28 (BestGrowthStock) – Brazil’s primary budget
surplus fell 39 percent in 2009 as the tail end of a six-month
recession and a slump in tax revenues weighed on the country’s
public accounts.

The consolidated primary budget surplus totaled 64.518
billion reais ($34.93 billion) in 2009, down from a surplus of
106.42 billion reais in 2008.

“Because of the (global financial) crisis, we had a
significant drop in revenues,” said Altamir Lopes, head of the
economics research department at the central bank.

The surplus was equivalent to 2.06 percent of gross
domestic product for 2009, the lowest since the start of that
data series in 2001. The surplus was equal to 3.54 percent of
GDP for 2008.

The primary budget surplus is considered a gauge of a
country’s ability to service its debt.

“It’s a very weak result … more because of the quality
than the quantity,” said Andre Sacconato, an economist at
consultancy Tendencias.

The government used all possible devices to meet the
target, he said, adding, “This distorts slightly the concept of
the primary budget surplus.”

Brazil’s public accounts deteriorated sharply last year as
sluggish economic growth, a boost in government spending and
tax breaks to key industrial sectors aimed at reviving the
economy squeezed government revenues.

The government also excluded investments in its flagship
infrastructure program, known as PAC, from its accounts to meet
the primary budget target. Investments worth 0.44 percent of
GDP were excluded to meet the 2009 target of 2.5 percent of
GDP.

The International Monetary Fund first endorsed the
“flexible” accounting standard in an agreement with Brazil in
2005 as a way to maintain priority investments without
abandoning primary surplus targets.

Sacconato, however, called government efforts to meet the
target “creative accounting.” Not only was the government
excluding priority spending to meet the target but in November
a transfer of escrow accounts from federal banks to the
national treasury helped inflate that month’s primary budget
surplus.

DECEMBER RESULTS

In December, Brazil posted a smaller-than-expected
consolidated primary budget surplus (BRPSPS=ECI: ) of 276 million
reais ($149.4 million).

The government had been expected to post a primary surplus
of 1 billion reais, according to the median estimate of 11
economists surveyed by Reuters. Estimates ranged from a deficit
of 5 billion reais to a surplus of 7 billion reais.

The primary budget surplus in December compared to a
deficit of 20.66 billion reais in December 2008, which had been
affected by the government setting aside money for its first
sovereign wealth fund.

Similarly, Brazil’s nominal budget deficit in December
narrowed sharply from the same time last year.

Brazil’s overall budget, which includes interest payments,
ran a deficit of 13.942 billion reais (BRBUD=ECI: ) in December,
sharply down from a deficit of 37.67 billion reais in the same
month of 2008.

In 2009, Brazil posted a nominal budget deficit of 104.62
billion reais, far wider than the 57.24 billion reais deficit
in 2008.

Net public sector debt grew to 43 percent of GDP in
December 2009 compared to 37.3 percent of GDP in December
2008.

For a breakdown of Brazil’s fiscal indicators in December
please see: http://www.bcb.gov.br/?ECOIMPOLFISC
($1=1.847)

Stock Research Tools
(Editing by James Dalgleish)

UPDATE 3-Brazil 2009 primary budget surplus hits 8-year low