Brazil’s public sector may close year with first primary surplus since 2013

RIO DE JANEIRO, BRAZIL – Minister of Economy Paulo Guedes said on Tuesday that the public sector – which includes federal, state, municipal and state accounts – should post a primary surplus at the end of this year, recording its first positive data since 2013.

In a presentation in English at an event sponsored by Eurasia consultancy, the Minister said that the federal government’s support to states and municipalities has led to substantial improvement in the accounts of regional governments.

The Minister pointed out that President Jair Bolsonaro’s current mandate will end with lower spending than observed in his first year, in 2019.

He said the government began with an expenditure of 19.5% of Gross Domestic Product (GDP) in 2019, a level raised to 26.5% of GDP in 2020, during the pandemic, and finally back to 19.5% in this year’s projections. According to the portfolio’s estimate, spending should range between 18% and 18.5% of GDP in 2022.

Guedes said that despite the increase in spending to expand social programs, the deficit estimate for 2022 is 0.5% of GDP.

The Minister also said he would rather ask for a “waiver” than review the spending cap, but stressed that the country is a democracy and the final decision was to review the cap.

He said that the change in the cap opens room in the budget and is “politically opportunistic,” but he noted that this additional margin has been taken up by expenses such as the purchase of vaccines and social security.

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