Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (70987)	2/12/2011 5:50:07 AM
From: elmatador	Read Replies (1) \| Respond to of 218645

Austerity, Brazil-style February 9, 2011 11:49 pm by Joe Leahy 2 0 One of the trickier aspects of Brazil’s budget is that it is never really fixed in stone at any point in time. Congress approves a budget towards the end of each year that the government is then free to adjust as it feels fit during the course of the next 12 months. Usually, the government sets aside part of the sums allocated for each area of spending, depending on whether it can afford the outlay or not as the year progresses. The difference this year is that Brazil’s government has decided that rather than setting aside these amounts and possibly spending them later, it has cut some of them altogether. This is austerity, Brazil-style, but it should not be confused with the way things are done elsewhere. Brazil’s budget cut of R$50bn announced on Wednesday does not in any way mean that government spending will fall in 2011 compared with 2010. In fact, a number of analysts believe that after various adjustments, such as stripping out income from Petrobras’ $70bn offering last year, the budget in real terms will be significantly bigger this year compared with 2010. Marcelo Salomon, Brazil chief economist with Barclays Capital, says budget expenditure will still be 3 per cent bigger in 2011 in real terms – after adjusting for inflation. This is well short of last year’s 9.3 per cent growth in real terms but can hardly be characterized as a “cut”. He adds that for the government to achieve its target of a 3 per cent primary surplus – revenue less spending before interest rates – it will need a 7 per cent real increase in total revenue. This would be equal to 0.4 per cent of gross domestic product in a year when the economy will not be growing as quickly. “Hence, execution will not be a walk in the park, with challenges not only on the expenditure side, but also in boosting tax collections in a year of slower economic activity,” Mr Salomon says. Others, such as Nick Chamie of RBC Capital Markets, point out that the government is downsizing what was essentially an inflated budget anyway, one that was full of items from the wishlist of Congress. The quality of the cuts will be difficult to evaluate until the details are released. Still, the difference this year is that the government is putting this R$50bn out of reach completely. That means even if the economy performs better than expected and revenues prove higher than anticipated, this is R$50bn the government will never spend. That, at least, is something worthy of praise. blogs.ft.com