Brazil Registers Highest Primary Deficit Since 2001

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The result of the 2015 primary deficit for Brazil’s federal, state and municipal governments together, closed last year at R$111.249 billion the worst deficit since 2001, representing 1.88 percent of the country’s GDP. The results, released by the Central Bank show that last year was the second consecutive year for negative annual results for the country.

The reduction of revenues from taxes, due to the weakening of the Brazilian economy in addition to the payment of loans by the federal government to state-owned banks led to the deficit, according to the Central Bank.

“There was a reduction of revenues from taxes due to the economic activity rhythm observed in 2015, despite the reduction in the public sector spending,” said Fernando Rocha, chief-adjunct of the Economic Department at the Central Bank.

He added that R$72.4 billion in payments by the federal government for the so-called ‘pedaladas’ also weighed on the annual deficit. Pedaladas are fiscal maneuvers conducted by the federal government in which loans were obtained from state-run financial institutions but not computed as passives for the federal government.

The negative result of last year’s primary account came from the federal government, with a total deficit of R$116.656 billion, while state government registered a surplus of R$9.075 billion and municipalities a surplus of R$609 million. State-owned companies, excluding Petrobras and Eletrobras, registered a primary deficit of R$4.278 billion.

The net debt of the public sector closed at R$2.136 trillion in December, which corresponds to 36 percent of the GDP, up by 1.7 percent in relation to November, while the gross debt closed at R$3.927 trillion during the last month of the year, or 66 percent of the GDP.