Brazil Public debt forecast to reach 84% of GDP by 2018

Brazilian public-debt forecasts for the next few years are raising concern. The gross debt, which ended 2015 at 66.2% of GDP, could reach nearly 84% in 2018 according to Itaú projections. The level that excludes foreign reserves from the gross debt could also rise, going to 58% of GDP in 2018 from 42% last year. Itaú expects the public sector to continue posting primary deficits in the period, marked by very weak economic performance and high real interest rates.

valor.com.br 10fev16

There will be no surplus and the government knows it

Before defining how much of this year’s budget it will cut, the government will have to take a much more difficult decision. President Dilma Rousseff and her economic ministers will have to evaluate whether it is worth keeping the illusion that it’s possible to achieve the primary-surplus target of 0.5% of GDP. This is the first time in which the year begins with all private and government economists aware that the fiscal target is a mirage. The best option for the government may be showing full transparency to society on the gloomy situation of public accounts.

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.