LatinNews Daily Report - 21 February 2014

ECONOMY | Mantega bows to the inevitable. On 20 February Brazil’s treasury, led by the externally-discredited finance minister Guido Mantega, announced a cut in the official primary surplus target to 1.9% of GDP for 2014, from 2.3% previously. The government said it would freeze R$44bn (US$18.44bn) in public spending to meet the primary surplus target, up from R$38bn last year. “Our projections are attainable and realistic and conservative, so we should deliver this result in December," Mantega stated at a press conference. The latest projection is based on real GDP growth of 2.5% year-on-year in 2014 (down from a previous forecast of 3.8%), with inflation of 5.3% (down from 5.8% previously). Markets welcomed the ‘reality check’ and the Real rose 1% in response to close the day at R$2.37/US$, its strongest level since 21 January last. Yet fiscal analysts remain slightly sceptical as to whether the government will be able to deliver on its promise ahead of President Dilma Rousseff’s bid for re-election in October. Steadily shrinking primary surpluses mean that the overall budget deficit hit a three-year high of 3.2% of GDP in 2013, up from 2.48% in 2012.

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