The Brazilian government has announced that it will increase its primary surplus target, which does not take into account the payment of interest on public debt, for 2011 with the aim of preventing the financial crisis in developed countries from having an effect on the South American country's economy. This was stated by the Minister of Economy, Guido Mantega.
The initial target was to close the year with savings in the public accounts of 117,8 billion real (about 73,625 million dollars). Yesterday, Dilma Rousseff's government raised its target to 127,8 billion reals (about 79,887 billion dollars), which represents about 3,3% of gross domestic product, assuring that the extra savings will concern only current expenses and it will not touch investments. According to the Minister, these spending cuts represent between 0,25 and 0,30% of the country's GDP.
Mantega said that the cut in spending was decided by Dilma Rousseff as a preventive measure in the face of the international situation and not because the country is feeling the effects of the crisis. According to the Minister, "in the next two years the world economy will grow and demand less and this will also have repercussions on Brazil". Furthermore, Mantega reiterated that, if the international economic situation worsens, the central bank will be able to adopt more expansionist monetary measures to prevent Brazil from being infected.
Even the entrepreneurs of the country's large companies have approved this maneuver. According to them, the measures are appropriate at a time of uncertainty in the world economy and could help reduce interest rates. Entrepreneurs declare that they are convinced that these measures will ensure continuity of economic growth and will allow companies to keep their investment plans and growth projections unchanged in 2011.
Meanwhile, the markets are starting to speculate on a possible reduction in interest rates by the Brazilian central bank: it would be the first time in the last two years.
