Brazil Aug primary surplus down more than forecast

Sep 26, 2007 - Brazil's consolidated primary budget surplus fell more than expected in August from a year earlier as government spending grew and profits at state-owned companies declined, government data showed on Wednesday.

The primary surplus fell to 8.09 billion reais ($4.37 billion) in August from 13.18 billion reais in August a year ago, the central bank said.

The result was much lower than the 12.75 billion reais median estimate of 14 economists in a Reuters poll. The estimates ranged from 9.8 billion reais to 13.7 billion reais.

In July, the government had a primary surplus of 7.9 billion reais.

In the 12 months through August, the primary surplus was equal to 4.12 percent of gross domestic product compared with 4.35 percent of GDP in the 12 months through July.

The primary surplus, which excludes interest payments, is closely watched by investors as a gauge of a country's ability to service its debt.

The overall budget including interest payments resulted in a deficit of 2.85 billion reais in August, compared with a gap of 2.38 billion reais in August a year ago.

The overall deficit, referred to in Brazil as the nominal budget deficit, fell sharply from 6.18 billion reais in July.

Net public sector debt edged down to 43.1 percent of GDP in August from 44 percent in July.

Brazil Q2 GDP up 5.4 yr-on-yr, up 0.8 pct vs Q1

Sep 12, 2007 - Brazil's economy grew less than expected in the second quarter, held back by a slowdown in the services sector and a fall in government spending, but economists expect surging investments to fuel faster growth.

Gross domestic product, the broadest measure of a country's output of goods and services, grew 0.8 percent from the first quarter and 5.4 percent from a year earlier, national statistics agency IBGE said on Wednesday.

The economy, Latin America's largest, was expected to have grown 1.2 percent from the first quarter and 5.8 percent from the second quarter of 2006, according to median estimates in a Reuters survey.

"I wouldn't take this as an indication the economy is growing too little," said Mauricio Oreng, an economist at Itau Corretora in Sao Paulo. "I'd read this (quarterly) GDP data with some caution because it implies 3.2 percent annualized growth that doesn't reflect the real economy."

Expansion in services slowed to 0.7 percent from 1.7 percent in the previous quarter, while Brazil's industry grew 1.3 percent quarter-on-quarter, accelerating from a 0.4 percent rate of expansion in the first three months of the year.

The agricultural sector, often referred to as the green anchor of the Brazilian economy, grew 0.6 percent, rebounding from a 4 percent decline in the previous quarter.

INVESTMENT GROWTH

Government spending grew 0.2 percent, slowing sharply from 2.7 percent in the first quarter.

Capital investments in things like machinery, factories and infrastructure grew 3.2 percent quarter-on-quarter after expanding 2.7 percent in the first quarter.

"Capital investments show a strong trend. That's good for more sustained growth going forward," Oreng said.

Household spending rose 1.5 percent as real wages climbed, the government boosted the minimum monthly salary and declining borrowing costs made consumer credit more accessible.

GDP grew a revised 0.9 percent in the first quarter from the fourth quarter of 2006, while year-on-year growth in the first quarter was revised to 4.4 percent from 4.3 percent.

Economists expect revisions later this year will show higher growth in 2007 as the IBGE receives more detailed data.

"It's probable also some future revisions will be made and improve this outcome, which wasn't bad because it indicates the pace of growth continues strong and consistent," said Alexandre Mathias, head of economic research at Unibanco Asset Management.

Brazil's economy expanded 3.7 percent in 2006 and is expected to grow 4.7 percent in 2007, according to the most recent central bank forecast. While those growth rates are above average for Brazil, they still lag emerging market peers like India and China.

Brazil cuts Selic rate to 11.25 pct as prices rise

Sep 5, 2007 - Brazil's central bank lowered its benchmark lending rate on Wednesday to 11.25 percent from 11.5 percent, the smallest cut since April as inflation accelerates and the economy gains steam.

The bank's monetary policy committee, known as Copom, voted unanimously to reduce the so-called Selic rate, trimming the size of rate cuts after two consecutive reductions of 50 basis points.

"The Copom examined the macroeconomic scenario and decided that at this moment, the risks for future inflation still warranted additional monetary stimulus," the bank said in a statement explaining its decision.

"The committee will closely monitor the development of the macroeconomic scenario until its next meeting to then define the next steps in its monetary policy strategy."

Policymakers next meet to decide on rates on Oct. 16-17.

The cut was expected by all 20 economists in a Reuters poll.

The bank has slashed the Selic by 8.5 percentage points since September 2005, cutting lending rates 18 consecutive times in Brazil's longest-ever monetary easing cycle.

Consumer prices have risen every month since April on an annual basis as prices for food items surge.

CAREFUL STEPS

The IPCA inflation index, which the central bank uses to set interest rates, rose 3.95 percent in the 12-month period through mid-August, the highest annual rate since a 3.97 percent gain in July 2006. The index rose 3 percent in April, then quickened to 3.18 percent in May, 3.69 percent in June and 3.74 percent in July.

Brazil's inflation is running below the central bank's target of 4.5 percent. Still, some economists have argued policy makers needed to trim the size of rate cuts as economic growth accelerates to keep inflation at bay.

"The Copom did what was expected given the faster economic activity, the increase in inflation and as the international scenario is now more uncertain," said Alexandre Mathias, chief economist at Unibanco Asset in Sao Paulo. "It will have to evaluate its next steps very carefully."

The interest rate decisions have shown a clear division among policy makers, with a 4-3 split vote in April, 5-2 in June and 4-3 in July. The unanimous vote on Wednesday signaled the bank may soon stop cutting rates altogether, said Octavio de Barros, director of economic research at Bradesco.

"After a long period of dissension, the unanimous vote confirms the central bank is united," Barros said. "This was most likely the last cut in the Selic this year... but I don't rule out one more cut."

The bank had already said in the minutes of its July meeting that faster growth would require it to be especially cautious about future cuts. Since the last meeting, indicators showed faster growth and a surge in consumer prices.

Of the 13 economists in the Reuters poll that gave forecasts for Brazil's interest rates for the rest of the year, nine expect the bank will trim the Selic by a quarter percentage point again in October, while four expect policy makers will keep rates unchanged.

Brazil's trade surplus rises 5.6 pct in August

Sep 3, 2007 - Brazil's trade surplus rose 5.6 percent in August from July, government data showed on Monday, as imports grew at a slower pace after the country's currency tumbled during global market turmoil last month.

The trade surplus rose to $3.54 billion in August from $3.35 billion in July. The result was lower than the $4.55 billion surplus in August 2006 and higher than a $3.1 billion median estimate of 11 economists in a Reuters survey. The estimates ranged from $3.05 billion to $3.7 billion.

Exports rose 6.9 percent to $15.10 billion in August from July, slightly down from the 7.6 percent expansion in July from June. Imports grew 7.4 percent to $11.57 billion in August, half the growth rate for the month-on-month expansion in July, when imports rose 15.8 percent.

Brazil's currency, the real , slumped 4.3 percent in August, posting its biggest decline in 15 months because of the market volatility caused by concerns over a global credit crunch. The weaker currency made it more expensive to buy goods from abroad.

Brazil, Latin America's largest economy, posted a record trade surplus of $46.08 billion in 2006.

Brazil budget sees economy growing 5 pct in 2008

Aug 31, 2007 - The Brazilian government's budget proposal for 2008 forecasts the economy will expand 5 percent next year, in line with previous estimates and slightly above official expectations of about 4.5 percent growth in 2007, the Planning Ministry said on Friday.

The proposal also estimates that Brazil's benchmark IPCA consumer price index will rise 4 percent in 2008, in line with market forecasts and below the central bank's annual target of 4.5 percent inflation.

The IPCA, which the central bank uses as a guide when setting interest rates, is widely expected to rise less than 4.5 percent in 2007 as well.

The budget proposal, which will be sent to Congress for approval, estimates that the government will set aside 30.2 billion reais ($15.4 billion) next year for investments. Some 18.8 billion reais of that will go to the government's so-called growth acceleration package, a series of measures aimed at jump-starting Brazil's sluggish economy.

The budget also earmarks 62.1 billion reais for investments in 2008 in state-run enterprises such as oil giant Petrobras.

The proposal estimates the social security deficit will fall to 41.6 billion reais at the end of 2008 from a projected 45 billion reais in 2007. The social security system has long been a major drag on Brazil's public finances.

The budget also estimates that the monthly minimum wage will climb to 407.33 reais in 2008 from 380 reais at present. ($1 = 1.96 reais)

Lula Plans to Boost Brazil Spending 9.7% Next Year

Aug 31, 2007 - Brazilian President Luiz Inacio Lula da Silva plans to boost spending 9.7 percent in 2008 as faster economic growth boosts tax revenue, allowing the government to spend more on public works and social programs.

Lula proposed total spending of 389.4 billion reais ($198.9 billion) next year, compared with 354.9 billion reais authorized for this year, the Budget Ministry said today in a statement distributed in Brasilia. The proposal forecasts that revenue will rise 11 percent to 565.6 billion reais.

"The government is taking advantage of a good situation in the economy to boost spending," said Alexandre Lintz, senior economist for Latin America at BNP Paribas in Sao Paulo. "The spending increase doesn't represent a risk to the fiscal situation because the government only spends money after making sure the revenue met the target."

Lula plans to boost spending as record-low interest rates and rising demand for Brazilian commodity exports are expected to fuel economic growth and boost tax revenue. The budget proposal, based on market estimates, assumes that Brazil's economy will grow 5 percent in 2008 from an expected 4.7 percent in 2007, and that annual inflation next year will quicken to 4 percent from 3.68 percent in 2007.

"The government's first goal with this bill was to maintain fiscal policies and austerity," Budget Minister Paulo Bernardo said at a news conference in Brasilia. "The second was to consolidate the president's second-term goals of emphasizing policies in the social area and building up and improving infrastructure."

Projections

The budget deficit will drop to the equivalent of 1.1 percent of gross domestic product next year from an expected 2007 deficit of 2.2 percent, as revenue growth outpaces spending growth, the statement said. The government in April forecast that the 2008 budget deficit would fall to 1.5 percent of GDP.

"Government spending next year will be stable as a percentage of GDP and that is good news," Lintz said.

The government plans to boost social spending 17 percent next year to 73 billion reais and spending on public works, including roads and ports, 12 percent to 23 billion reais. It also plans to raise the country's minimum wage 7.2 percent to 407.33 reais from 380 reais today, the statement said. The government increased the minimum wage 8.6 percent this year.

Brazil central gov't primary surplus dips in July

Aug 28, 2007 - Brazil's central government primary budget surplus fell slightly to 5.052 billion reais ($2.52 billion) in July from 5.188 billion reais in June, the National Treasury said on Tuesday.

But the surplus surged 67 percent from July last year, when it reached 3.026 billion reais, as government revenue from tax collection jumped.

The surplus in 2007 through July was equal to 3.35 percent of gross domestic product compared with 3.27 percent of GDP over the same period of last year.

The primary surplus includes spending by the Treasury, central bank and social security system but excludes interest payments on debt and transfers to state and local governments.

It feeds into the consolidated public-sector primary surplus, which is closely tracked by investors as a measure of Brazil's ability to pay its debts. The consolidated primary surplus, due out Wednesday, also excludes interest payments.

($1=2.003 reais)

Brazil Survey: Analysts Again Raise '07, '08 GDP Forecasts

Aug 27, 2007 - Brazilian financial market analysts and economists raised their forecasts for the country's 2007 and 2008 gross-domestic-product growth, according to the central bank's weekly market survey, published Monday.

Analysts raised slightly their 2007 GDP expansion estimate to 4.64% from 4.62% in the previous survey. In 2006, Brazil's GDP grew 3.7%. This week's was the fourth-consecutive increase in GDP forecasts.

In the first quarter, Brazil's GDP grew 4.3% from the year-earlier period, as falling domestic interest rates and expanding credit led to a strong performance in the services sector.

In addition, financial analysts raised their 2008 GDP estimate to 4.40% from 4.35%.

The weekly central bank survey tracks the opinions of 100 analysts and economists from banks and brokerages, reporting the average of their expectations.

In the meantime, experts raised their estimates for 2007 inflation as measured by the official consumer price index, or IPCA, to 3.86% from 3.77%.

Despite the increase, the inflation projection remains below the central bank's inflation target of 4.5% for the year. The IPCA inflation rate reached 3.95% for the 12 months through mid-August, according to data from the Brazilian Census Bureau, or IBGE.

Experts maintained their 2008 year-end IPCA outlook at 4.0%.

In addition, economists kept their 2007 year-end Selic benchmark interest rate forecast at 10.75% and also maintained their outlook for the 2008 year-end Selic rate at 9.75%.

Currently, the base rate stands at 11.50%.

The estimate for the 2007 year-end debt-to-GDP ratio was kept at 43.5%.

Experts reduced their estimate for the 2007 trade surplus to $42.7 billion. In 2006, Brazil posted a record trade surplus of $46.07 billion.

The Brazilian real is expected to end 2007 at BRL1.9 to the dollar, analysts forecast. On Friday, the real closed at BRL1.942 to the dollar.

Brazil posts current account deficit in July

Aug 23, 2007 - Brazil posted a current account deficit of $717 million in July compared with a surplus of $3.05 billion in the same month a year ago, the central bank said on Thursday.

The result was weaker than the $100 million surplus median forecast of 16 economists surveyed by Reuters. The estimates ranged from a deficit of $750 million to a surplus of $785 million.

In June, the current account -- the widest measure of a country's trade in goods and services -- was a surplus of $696 million.

In the 12 months through July, Brazil posted a current account surplus equal to 0.99 percent of gross domestic product compared with 1.33 percent through June.

The current account balance tracks a country's net flow of external transactions, including foreign trade, interest payments and services such as tourism. It is used to gauge a country's dependence on foreign capital.

Foreign investment, which falls under the capital account of the balance of payments, has surged as falling interest rates and accelerating economic growth prompt companies to invest in plants and machinery to produce more goods.

Foreign direct investment in Brazil, Latin America's largest economy, jumped to $3.58 billion in July from $1.59 billion in the same month a year ago. In June FDI had surged to a monthly record of $10.32 billion.

Brazil's FIPE inflation slows to 0.27 pct in July

Aug 3, 2007 - Consumer prices in Brazil's largest city, Sao Paulo, rose 0.27 percent in July, slowing from June's 0.55 percent rise, as food prices rose less and housing costs dipped, the Fipe research institute said on Friday.

The rise was slightly lower than the median forecast of 0.32 percent in a Reuters survey of economists.

Clothing prices fell 0.62 percent and transport costs extended their drop to 0.38 percent after 0.16 percent the previous month. Food prices rose the most, by 1.06 percent, but much less than in June, when the rise was of 1.9 percent, due to a seasonal decline in output of certain crops.

The Fipe index is closely watched by economists for trends in Brazil's benchmark IPCA inflation index, which is used by the central bank to set interest rates.

Brazil 2006 primary budget surplus drops to 4.32 pct of GDP

Jan 31, 2007 - Brazil recorded a primary budget surplus (excluding payment of interest on debt) of 4.32 pct of GDP in 2006, a decrease from 4.83 pct of GDP in 2005, the central bank announced.

However, the surplus is still higher than the government target of 4.25 pct of GDP.

Last year, the primary balance between income and expenditure reached 90.144 bln real (41.35 bln usd) versus 93.505 bln in 2005.

This budgetary effort has, however, not been enough for Brazil to be able to pay off all of the interest on its public debt, which last year reached 160.027 bln real (73.406 bln usd), or 7.66 pct of GDP, compared with 157.146 bln real and 8.11 pct in 2005.

Public deficit (after payment of interest on debt) has therefore increased to 3.35 pct of GDP versus 3.28 pct in 2005.