Brazil Govt Deficit Widens to R$20.2B in November

Government accounts registered a primary deficit of R$20.2 billion in November, according to data released by the National Treasury. This result marks a deterioration compared to the same month in the previous year, which showed a negative balance of R$4.5 billion.

The negative balance is the result of two converging factors: a decline in revenue and an increase in public spending. Net revenue fell by 4.8% in real terms, while total expenses grew by 4.0%.

When analyzing the cumulative data for the year, the deficit widens significantly. From January through November, the government recorded a primary deficit of R$83.8 billion. This figure is higher than the R$67.0 billion deficit recorded in the same period of the previous year.

The fiscal data for November highlights a challenging scenario for public finances. The Ministério da Fazenda (Ministry of Finance) released the numbers showing a primary deficit, which refers to the result where government revenues from taxes are lower than expenses, excluding interest on public debt.

On the revenue side, the government faced significant headwinds. Net revenue (after transfers to states and municipalities) reached R$166.9 billion in November. This represents a real decrease of 4.8% compared to November of the previous year.

Conversely, government spending continued to climb. Total expenses in November amounted to R$187.1 billion, marking a real increase of 4.0% year-over-year. The widening gap between revenue and expenditure was the primary driver of the R$20.2 billion deficit for the month.

Looking at the broader picture, the fiscal situation for the first eleven months of the year shows a similar trend of widening deficits. The cumulative primary deficit stood at R$83.8 billion through November.

This negative result stems from expenses outpacing revenues over the year. Specifically:

• Net Revenue: Totaled R$2.08 trillion, representing a real increase of 2.9%.
• Total Expenses: Reached R$2.16 trillion, showing a real increase of 3.4%.

Comparing these figures to the same period in the previous year, the deficit has grown. The R$83.8 billion shortfall compares to a negative result of R$67.0 billion (inflation-adjusted) recorded in the first eleven months of the previous year.

The current results remain distant from the government's stated goal of eliminating the deficit. However, the existing fiscal framework provides specific margins for compliance.

According to the fiscal rules, the government is permitted to register a deficit of up to 0.25% of GDP without formally breaching the target. This amount is equivalent to approximately R$31.3 billion.

Furthermore, for the purpose of meeting the fiscal target, the government can exclude other liabilities. Specifically, up to R$44.5 billion in court decisions (precatórios) can be excluded from the calculation.

Therefore, in practice, the government may register a negative result of up to R$75.8 billion without formally failing to meet the fiscal target. This flexibility, while providing a buffer, has been the subject of criticism from analysts who argue that such exceptions make achieving fiscal balance more difficult.