Here is what Barclay’s Marcelo Solomon and Bruno Rovai have recently written regarding Brazil’s September fiscal results:
“… much weaker than expected… the surprisingly poor result was mainly driven by a strong increase in extraordinary expenditures during the month, but lower-than-expected revenues also helped to intensify the wider deficit trend…We remain skeptical that this trend can be reversed, especially considering that general elections will be held in October next year.
The critical issue, in our view, is the sustained and continuous primary surplus deterioration, which ultimately will push indebtedness ratios up. The primary surplus dropped to 1.6% in September from 1.8% in the previous month and 2.3% from the same month of last year. Net debt/GDP ratio rose to 35%, from 33.9% in the previous month, and in our view it is exactly this trend that should pave the way for a sovereign ratings downgrade in the beginning of 2014.”