Brazil has announced that its primary fiscal surplus is no longer 4.25% of GDP but 4.1%. According to a report by research outfit CreditSights, this move means that “investors will receive what just a few months ago seemed nearly impossible – an almost 1.1% of GDP erosion in the primary balance in just one year”. CreditSights reckons that even the new target might be optimistic. It lays the blame for the fiscal erosion on a massive spending binge by president Lula in an attempt to remain in power. The report concludes that Brazil’s fiscal structure “cannot be sustained over the long term”.
Sudip Roy,
June 01, 2006