Category: Brazil

The Brazilian government says the public sector posted a R$6.31 billion ($2.58 billion) primary surplus in May, raising its January-May primary surplus to $19.53 billion. The primary surplus – before interest payments – in the first five months of the year was equivalent to 6.6% of GDP. The primary surplus was 5.02% of GDP in the twelve months to May. Brazil has committed to a primary surplus of 4.25% of GDP. Economists at UBS say the government usually builds up a cushion of savings at the beginning of the year, when public spending is seasonally lower.

Brazil’s public sector net debt-to-GDP ratio, which includes Central Bank reserves, remained almost unchanged at 50.3% in May, compared with 50.4% in April. Economists at CSFB say the decline was mainly due to a 5.1% rise in the local currency.

Brazilian economists lowered their inflation forecast this year to 6.05 percent as the country’s slowing economy discourages companies from raising prices, according to a central bank survey. Inflation through mid June was up 7.7 percent year-on-year. A stronger real has hurt exports and consumer demand is waning after central bankers raised their benchmark interest rate to a 20-month high of 19.75 percent. Economists also cut their median economic growth forecast for the year to 3 percent, down from 3.5 percent at the end of May.

Bolivia’s President Eduardo Rodriguez promised that his country would honor its natural gas contracts with Brazil and Argentina, but also pledged to raise taxes on foreign oil companies and to increase government intervention in the oil and gas sector. Carlos Mesa, Bolivia’s last president, resigned earlier this month in the face of mass protests and roadblocks that choked off Bolivia’s main cities. The protesters, led by leftist congressman Evo Morales, demanded a nationalization of Bolivia’s oil and gas industry and more political power for the country’s poor indigenous majority. Rodriguez has promised to call new elections within six months.

Brazilian bank lending rose 0.5 percent in May, the slowest pace in 16 months after the central bank raised interest rates nine straight months to discourage borrowing and stem inflation. President Luiz Inacio Lula da Silva has made increasing poor Brazilians’ access to credit one of the central economic goals of his presidency. Inflation was 8.05 percent in the 12 months through May, fueling speculation the central bank will hold its benchmark lending rate at a 20-month high of 19.75 percent.

Peru awarded an $809 million contract to Brazilian companies Norberto Odebrecht and Andrade Gutierrez to build a highway connecting the Peru’s Pacific coast to the Atlantic. The Inter-Oceanic highway will link existing roads in Peru’s southern Andes to the jungle town of Inapari on the Brazilian border and from there will wind through the cities of Rio Branco, Porto Velho, Cuiba, and Santos. The project will be financed by the Andean Development Corporation and Brazilian export promotion agency Proex.

Brazil’s National Monetary Council announced an inflation goal of 4.5 percent for 2007, unchanged from its target for this year and next. Brazilian policy makers are scaling back their push to lower inflation after surges in state-regulated prices such as electricity and telephone rates and bus fares hurt their efforts in previous years. Annual inflation slowed in the 12 months through June 13 to 7.7 percent from 8.1 percent in the 12 months through the end of May.

Brazil’s current account surplus was $615 million in May, down sharply from $1.5 billion a year earlier. The real has climbed 22 percent in the last year on a new wave of capital inflows, crimping exports. FDI into Brazil reached $7.2 billion in the first five months of this year, compared with $3.3 billion for the year-earlier period.

Brazil’s lower house of congress was suspended Wednesday after a scuffle broke out on house floor. The fighting began after former chief of staff Jose Dirceu, who re-took his seat in congress after resigning last week, defended President Luiz Inacio Lula da Silva’s government and denied allegations of corruption in the president’s own Workers’ Party. Lawmakers started shoving each other after Congressman Jair Bolsonaro, of the governing coalition’s Popular Party, walked across the floor of congress holding a bag of garbage marked “Lula” above his head.

Brazil’s Finance Minister Antonio Palocci resisted pressure from lawmakers and rejected a plan to refinance and extend repayment terms on as much as $7.2 billion of domestic farm debts. Farmers owe state-banks $5 billion and private sellers of equipment and fertilizer another $2.2 billion.