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Brazil to Pay 13% of Debt Due in 2006. Rest to Be Renegotiated.

The Brazilian government’s federal debt (domestic and foreign together) is expected to grow at least 10.6% in 2006. This would place the total debt at US$ 430 billion in December.

This estimate appears in the Annual Government Debt Finance Plan, published Monday, January 16 by Brazil’s Federal Treasury Department.

US$ 211 billion of the total debt, including US$ 198 billion in domestic debt, will be due in 2006. The budget provides for resources on the order of US$ 27 billion for debt payments in 2006. The rest will have to be renegotiated over the course of the year.

Last year’s foreign current account balance – the result of all commercial and financial transactions with foreign countries – has not been closed yet, but the average forecast by economists from the private sector is for a US$ 15 billion surplus.

This estimate is due mainly to Brazil’s excellent US$ 44.7 billion trade surplus (exports minus imports).

The Focus bulletin, released last week by the Central Bank (BC), containing the financial market’s projections for the chief economic indicators, shows that the trade balance is expected to continue to perform well.

The analysts project a US$ 37 billion trade surplus at the end of 2006, guaranteeing another current account surplus, of around US$ 8 billion.

Everything suggests, therefore, that the analysts included in the BC’s survey believe that Brazil will register a current account surplus for the fourth year in a row, improving the country’s financial health.

This does not translate, however, into confidence on the part of foreign investors, who invested no more than US$ 15.30 billion last year in the Brazilian productive sector and are expected to invest US$ 15 billion this year, according to the estimates reported in the Focus bulletin.

As in previous forecasts, industrial production is expected to grow 3.15% in 2005 and 4.05% in 2006, while the Gross Domestic Product (GDP) – the sum of all wealth produced in the country – is expected to grow 2.40% in 2005 and 3.50% in 2006.

If these predictions stand up, the ratio between net government debt and the GDP is expected to be 51.60%, when the accounts for 2005 are finally tallied, and decrease slightly to 50.70% in 2006.

The Focus bulletin study predicts that the exchange value of the US dollar will be R$ 2.40 at the end of 2006 and that the annualized benchmark interest rate (Selic), which is now 18%, will be lowered to 17.50% this month and will continue to drop gradually to end the year at 15%.

ABr

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  • Guest

    Contradictory….. again !
    …in 2005, the Federal and government debt increased, in Reais currency, from 785 billions to 950 billions. Or an increase of 21 %.
    My numbers are year over year from November 2004 to November 2005.
    Easily checkable with government own published numbers.
    Worse, december is usually a very bad month
    because large amounts of money are transferred to states and municipalities.
    So, lets wait the official numbers for the whole of 2005 but final numbers cannot be better.

    Furthermore, In view of the increase of the total debt of 21 % in 2005 with a low growth year, it is doubtful that in 2006 the increase of the total debt will be only 11 % or so, if growth will be higher…as expected !

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