Brazil Registers Worst 6-Month Primary Deficit in History

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The increase in earmarked expenditures and the significant decrease in revenues led Brazil’s federal government to register the worst primary deficit of its history during the first semester of 2016. In the first six months of the year the primary deficit totaled R$32.52 billion compared to a deficit of R$1.76 billion during the same period last year, according to Brazil’s Treasury Department.

“This result indicates the great challenge we have to meet to balance our public accounts, which is necessary for the recovery of confidence in the economy,” said Treasury Secretary, Ana Paula Vescovi during the announcement of the results.

Officials say the deficit was not larger because of revenues coming in from the renewal of concession contracts of hydroelectric plants, which rendered the government approximately R$16 billion.

According to Vescovi earmarked expenditures continue to be one of the main problems in balancing the government’s accounts, with the social security system registering a deficit of R$61.2 billion for the first six months of the year. The deficit was reduced due to surplus registered by the Treasury and the Central Bank, of R$28.6 billion.

The Treasury Department forecasts a R$149 billion deficit for social security for the year of 2016, almost double of what it was in 2015, when it registered a deficit of R$85 billion.

And while earmarked expenditures, such as social security, continues to increase, revenues in Brazil’s struggling economy remains on a downward trend, decreasing by 7.7 percent in the accumulated total for the first six months of this year, said officials.

Brazil’s government forecasts a primary deficit this year of R$170 billion. If the estimate is correct, it would be the third consecutive year Brazil registers a deficit in its primary accounts.