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Annual
current account deficit shrinks to a third of its 2001 level
The current account registered a US$ 343 million deficit in the fourth
quarter, while the capital and financial account exhibited a surplus of
US$ 746 million. The current account deficit came in well below the figure
observed in the same quarter last year (US$ 5.7 billion), due principally
to the strengthening in the trade surplus, which widened to US$ 5.3
billion from US$ 1.4 billion in the same quarter of 2001, amid 21.6%
growth in total exports and a 7.1% contraction in imports.
The improved export performance was due to the more competitive exchange
rate and improved agricultural and manufacturing export performance in new
international markets, such as Africa, Asia and the Middle East, as
international demand in general remained subdued. The decline in imports
was due to the impact of the currency depreciation on real incomes.
As a result of the fourth quarter export boost, the annual trade balance
surplus reached US$ 13.1 billion, which helped narrow the annual current
account deficit to US$ 7.8 billion in 2002 from US$ 23.2 billion in 2001.
According to participants, the export sector is anticipated to perform
well this year with growth anticipated at 6.9%. However, a rise in
domestic demand also is likely to strengthen import growth, which is seen
at 4.5%. As a result, the trade surplus should widen further to US$ 15.0
billion this year, bolstering the current account, which is expected to
narrow to US$ 6.1 billion in 2003.
Fiscal
balances beat IMF targets
On 30 January, the government reported that the primary fiscal surplus
reached 52.4 billion reais (US$ 14.7 billion) in 2002. The surplus of
4.06% of GDP was well above the 3.88% of GDP target agreed to with the
International Monetary Fund (IMF) under the terms of the 15-month, US$ 30
billion stand-by agreement signed in August of last year. Furthermore, the
2002 figure also came in well above the 3.7% of GDP figure of the prior
year. As a result of the positive results last year and lingering concerns
about the public debt burden, the government decided to raise the primary
surplus to 4.25% of GDP for this year, which is above the 3.75% of GDP
surplus agreed to with the IMF.
Government moves to garner congressional majority
The Lula administration is gradually beginning to build a governing
majority in Congress, where Lula's Workers Party (PT, Partido dos
Trabalhadores) has only 17.7% of the seats. The government is seeking to
ensure a three-fifths majority that would enable the passage of
constitutional amendments needed to progress on economic policy, such as
pension reform. The Senate has elected former president (1985-1990) and
leader of the Brazilian Democratic Movement Party (PMDB, Partido do
Movimento Democrático Brasileiro), José Sarney, as the president of the
Senate. Sarney was a key supporter of Lula during the election and is
considered key to the government’s efficacy in the Senate. João Paulo
Cunha, from Lula's Workers Party, was elected head of the lower house. The
PT-led governing coalition in the legislature now has 254 of 513 deputies
and 31 of 81 Senators, which is still short of the majority sought by the
government. Constitutional reform would require 49 votes in the Senate and
308 in the chamber of deputies. |
