Marc Sergio Lima writes:\u00a0 Brazil’s budget deficit unexpectedly widened to a record in September, prompting the government to say it won\u2019t meet its fiscal target as a possible credit downgrade looms. Swap rates rose.<\/p>\n
The deficit widened to 69.4 billion reais ($28.4 billion), more than twice the 31.1 billion reais.\u00a0 The gap is the biggest since December 2001, and for the first time ever, Brazil posted a primary deficit for the first nine months of the year, totaling 15.3 billion reais.<\/p>\n
Fresh off the closest election win since the return of democracy,\u00a0 President Dilma Rousseff\u00a0 faces the challenge of pulling Brazil out of recession, slowing above target inflation and preventing a further deterioration of fiscal accounts that threatens the country\u2019s investment grade status. This week the central bank surprised analysts with a interest rate increase, marking the first measure in an effort to regain investor confidence. Now the government has to cut spending.<\/p>\n
\u201cThe credit rating firms have made it clear that the fiscal dynamics are very bad and a downgrade will happen if there isn\u2019t a clear, very strong and credible signal the government will reverse spending increases,\u201d Santos said in a phone interview from Sao Paulo. \u201cIt remains to be seen if the government will be able to do so.\u201d<\/p>\n
In March Standard & Poor’s downgraded Brazil\u2019s credit rating to one level above junk, citing a slowdown in economic growth and a deterioration in fiscal accounts. Moody\u2019s Investors Service signaled it could cut Brazil\u2019s credit rating to one level above junk when it lowered the outlook to negative last month.<\/p>\n
The primary surplus, which excludes interest payments, narrowed to 0.61 percent of gross domestic product in the 12 months through September, compared with a 1.9 percent target for 2014.<\/p>\n
The cost to protect the nation\u2019s debt securities against non-payment for five years dropped yesterday as investors interpreted the central bank move as a sign Rousseff is willing to unwind policies that fanned inflation and boosted the budget deficit.<\/p>\n
Brazil\u2019s economy entered recession after gross domestic product shrank 0.6 percent in the second quarter in the biggest quarterly contraction since 2009. That followed a revised 0.2 percent drop in the first three months of the year.<\/p>\n
Marc Sergio Lima writes:\u00a0 Brazil’s budget deficit unexpectedly widened to a record in September, prompting the government to say it won\u2019t meet its fiscal target as a possible credit downgrade looms. Swap rates rose. The deficit widened to 69.4 billion … Continue reading ![\"Dilma](\"http:\/\/www.w-t-w.org\/en\/wp-content\/uploads\/2014\/10\/Dilma-Rousseff-206x300.jpg\")
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