Despite the world financial crisis, Brazil should get to 2010 with a zero nominal deficit

On Thursday, (11/27), the National Treasury Secretary, Arno Augustin, participated in a public hearing at the Mixed Budgeting Committee, to assess the accomplishment of the fiscal goals of the second quadrimester. At that time, he affirmed that, despite the world financial crisis, Brazil should get to 2010 with a zero nominal deficit. “That is a perfectly feasible goal. Brazilian accounts are solid, which helps us to go through that turbulent phase with more tranquility” assessed the secretary.

The nominal deficit is zero when the government’s collection equals its expenses, including the ones with the payment of interests of public debt.

The rapporteur for the infrastructure area of the Federal Government's Budget for 2009, Deputy Carlito Merss (PT-SC), commemorated the numbers: “They show that Brazil’s economy has stability.” For the deputy, the robustness of economy is the result of fiscal rigor enforced in the almost four years of da Silva's Administration, and, before it, during Fernando Henrique Cardoso's, since the moment “it was decided, as a republic, that there would be fiscal responsibility".

According to Colbert Martins (PMDB-BA), the favorable fiscal rates explain why Brazil is being pointed out as one of the countries which will suffer the least with the crisis.

Income x expenses
According to the secretary, the nominal deficit got to represent 6.97% of the GNP in 1998, but was only 1.10% of the GNP from August 2007 to August 2008. And it dropped even more, to 0.08% of GNP, if the 12 months completed in October are considered.

Arno Augustin rebated the critics that attribute the improvement in the government deficit to the simple increase in collection, with the pressure on tax load”. The income was fundamental, but there is an important contribution of expense reduction.”

In 2007, the net income grew 12.4%, from January to October, over the same period of the former year. In the ten first months of 2008, though, the growth was 17.6%. If we compare the expenses with personnel from January to October 2007 with the same period in 2006, we can find a growth of 11.9%. That growth was smaller from 2007 to 2008: 10.1%

The expenses with personnel grew 1.7% regarding GNP from 2006 to 2007, but dropped 2.3% from 2007 to 2008, if we always consider the ten first months of each year. “It is something never seen before at the government’s accounts in Brazil”, said the secretary, when commenting on the slower payroll growth of federal government, if compared to GNP. “Brazil is investing more and is reducing its costing expenses”, he affirmed.

Primary surplus
Primary surplus of the public sector closed on 5.6% of GNP in October – solely the Union saved 4.02% of GNP; the other federative bodies saved 1.29% , and the federal government companies, 0.29%. The rate is 1.8 percentage points above the established target for 2008, which is 3.8% of GNP.

Arno Augustin said that the excess in primary surplus is partly normal at this time of the year, since some seasonal expenses, such as the 13th salary of public service is concentrated at the end of the year. On the other hand, it reflects a “strong movement of economy” so far.

Social Security
The improvement at the accounts of Social Security also had a positive impact on the fiscal situation of Brazil. From January to October 2007, the deficit of Social Security amounted to 1.83% of GNP. During the same period of 2008, that deficit dropped to 1.42% of GNP. “There was a greater formalization in labor market, a stronger growth in economy, the enhancement of IRS' inspection”, explained the secretary.

The president of the Budgeting Committee, Deputy Mendes Ribeiro Filho (PMDB-SC), said that the improvement of financial health of Social Security “is important to face the crisis at this moment”.

Report - Edvaldo Fernandes
Editing - Natalia Doederlein
Translation: Positive