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Strategies & Market Trends : Telebras (TBH) & Brazil -- Ignore unavailable to you. Want to Upgrade?

To: wl9839 who wrote (15299)	5/14/1999 2:03:00 PM
From: wl9839	Read Replies (1) \| Respond to of 22640

Brazil's Budget Deficit Falls to 120 Bln Reais Brasilia, May 14 (Bloomberg) -- Brazil's budget deficit narrowed in March as a rallying currency lowered debt payments and one-off tax payments filled Treasury coffers. The deficit in the 12 months ended March 31 was 120 billion reais ($72 billion), equal to 12.3 percent of gross domestic product, down from 132 billion reais in February, or 13.9 percent of GDP, the central bank said. While Brazil's deficit fell in March, it remains one of the biggest in the world. That lingers as a problem that could reverse a recent surge in investor confidence and capital flows into the country if the government doesn't slash it further. Central bank officials pointed to a growing primary surplus -- which tallies the fiscal accounts before interest payments -- as a sign that the country is headed towards reigning in its deficit. The primary surplus rose to 4.2 billion reais in March from a 2.4 billion surplus in the year-earlier period. That brought the first quarter primary surplus to 9.2 billion reais, much higher than the 6 billion reais target established in an accord with the International Monetary Fund. ''The performance sums up the government's commitment to clean up its public accounts,'' the bank said. However, more than one-half of March's primary surplus -- 2.4 billion reais -- came from international phone companies' one- time payments to the government from the $19 billion sale of Telecomunicacoes Brasilieras SA last year. Moreover, banks also made some one-off payments to the treasury as part of a social security tax amnesty program. ''How long can Brazil use extraordinary revenue to bolster its primary surplus?'' said Christian Stracke, a Latin American economist with Bankers Trust in New York. Currency, Rates The government's deficit also narrowed on a longer-lasting trend: a strong currency. The real soared 18 percent against the dollar in March after bottoming out from January's devaluation. That lowered the cost of government payments on both foreign and dollar-linked domestic debt. Added to March's gain was another 3.2 percent rise in April to 1.66 reais to the dollar, which will further lower debt servicing costs in that month. Moreover, interest rates began to fall in late March, and that will ease the government's financing costs in April and months to come. The central bank has lowered its benchmark overnight rate -- which sets the rate on government floating-rate debt -- to 27 percent from a 45 percent in March. About two-thirds of Brazil's domestic debt is tied to the overnight rate. Brazil's total domestic debt load fell to 470 billion reais in March, or 48 percent of GDP, from 501 billion reais in February. The IMF target for the end of March was 506 billion reais. ------------------------------------------------------------------------ © Copyright 1999, Bloomberg L.P. All Rights Reserved.