Central Bank sees risk of gross debt above 70% of GDP in 2016

The Central Bank forecasts that federal gross debt may reach 70.7% of GDP in 2016, even if the government achieves the primary-surplus target of 0.5% of GDP set for next year. Under an alternative projection, which uses a market forecast of a primary deficit of 1% of GDP in 2016, the gross debt would amount to 71.5% of GDP. The Central Bank\'s estimates take into account a relatively optimistic scenario for GDP performance, with a 1.9% economic contraction in 2016, according to its Inflation Report. Private-sector economists expect the output to contract 2.8% in the period. Gross debt reached 65.1% of GDP in November, or R$3.84 trillion, according to Central Bank data, compared with 57.2% in December 2014.

Dec 29, 2015 at 9:30 PM
valor.com.br 

Brasília studies bailing out Petrobras

Petrobras' headquarters in Rio de Janeiro

With $24 billion in debt coming due in the next two years, Petrobras may end up getting help from Brasília. According to government sources, there are proposals to bolster the state-controlled oil company’s equity with a loan contract without maturity, a hybrid instrument of debt and equity (IHCD) extended by the National Treasury.

Brazil Finance Ministry reviewing R$20bn in loans for states, cities

The Finance Ministry is reviewing R$20 billion in loan requests from states and cities. Domestic financing represents R$4.5 billion of the total, while US$3.9 billion are foreign loans. States need federal clearance to borrow R$16.4 billion of the total, according to a Valor survey of National Treasury data. Governors have been criticizing the Finance Ministry for holding back the loans, which they consider crucial for financing several projects. The ministry says it is developing new policies to evaluate the loans. “The approval of huge credit transactions for sub-national entities in the last few years has proven unsustainable in the new economic scenario,” the ministry says.

valor.com.br 11/19/15
Waldemar Jezler

Euphoria with Meirelles may prove unjustified

The financial market has supported the potential arrival of former central banker Henrique Meirelles at the Ministry of Finance by unmistakably pushing up the Ibovespa stock index and the real, the Brazilian currency. But what may be happening there is a classic case of overpricing.

Mr. Meirelles doesn’t represent a different economic policy from Joaquim Levy, the current minister. Therefore, one can deduct that the current path will be very similar to what the former Central Bank (BC) chief would take and that this is not the main explanation for the adjustment in asset prices. The euphoria with the change in command seems result of the view that Mr. Meirelles would have autonomy to appoint a new BC chief and a new minister of Planning. He would form a more cohesive economic team, capable of imposing on President Dilma Rousseff a consistency in the economic policy that doesn’t exist today.

Dilma under growing pressure to replace Finance Minister

Joaquim Levy and Henrique Meirelles

The process of replacing Finance Minister Joaquim Levy gains ground within the government, with the consequent change in the economic policy’s guidelines. The succession is likely to take place in the beginning of January, according to sources of the political coordination and of the leadership of the Workers’ Party (PT), but the exchange could happen as early as December, if the political and economic crises worsen.

Michel Temer: “A Bridge to the Future”

The most relevant aspect of the document “A Bridge to the Future,” launched last week by the Brazilian Democratic Movement Party (PMDB), is that it lucidly addresses themes forbidden in the Brazilian economic debate. The prohibition was promoted by the discourse and the practice of the Workers’ Party (PT) administrations since the ascent of Luiz Inácio Lula da Silva to power, in 2003. It is clearly a sign by Vice President Michel Temer, who presents himself as alternative in view of a possible impeachment of the president.

Brazil Amnesty Program still has some Flaws

Economic officials are concerned with the changes made by Deputy Manuel Júnior (Brazilian Democratic Movement Party, PMDB, of Paraíba) in the bill that regularizes funds Brazilians illegally sent abroad. The congressman, who is the bill's sponsor in the Chamber of Deputies, reduced the income tax rate and the fine to be applied to the regularized assets and eliminated the destination of proceeds to the fund that would cover losses some states will have with the reform of the Tax on Circulation of Goods and Services (ICMS). But there are serious legal problems in the original bill that the government sent to Congress that can render it unfeasible, former Federal Revenue secretary Everardo Maciel warned in an interview with Valor.

Brazil Economists See Less Room for Cutting Rates Next Year

Brazil analysts forecast that the central bank will have less room for cutting rates next year, as inflation expectations for 2016 rose for the 10th straight week.

Analistas propõem uso de créditos da dívida ativa em ajuste fiscal

Em tempos de ajuste fiscal, o volume de créditos que o governo federal tem a receber de devedores com prazo esgotado para o pagamento chegou a R$ 1,5 trilhão neste mês. Embora a maior parte deste volume tenha, aos olhos da União, pouca probabilidade de ser recuperado, especialistas ouvidos pelo Valor afirmam que o potencial de arrecadação da dívida ativa não deveria ser ignorado pela equipe econômica.