Brazil reports surprise surplus

This Monday, the Brazilian central bank announced that Brazil´s public sector posted a primary surplus of 3.5 billion reais in February. The amount is equal to roughly 700 million USD. It is a public sector surplus excluding interest payments.

The announcement was surprising, as a Reuters poll of economists had predicted an 8.6 billion reais deficit.

Also, the government debt as a share of GDP decreased to 79.2% in February from 79.5% in January.

In the 12 months to February, the primary surplus as a percentage of GDP reached 1.4%, which is an increase from the 1.23% posted for the previous month.

Federal transfers – but that´s not the whole story

So, what is behind the sudden surplus? Partly, the public sector has been boosted by federal transfers to states and municipalities, but there has also been a higher than predicted revenue stream coming from fuel sales, and state-owned companies recorded a 2.5 billion reais surplus.

In February, Brazil´s states and municipalities had a combined 20.2 billion reais surplus. Simultaneously, the central government posted a 19.2 billion reais deficit.

According to the Economy Ministry, higher tax revenue from booming commodities is helping the fiscal situation in Brazil, while public expenses are kept under control thanks to a constitutional spending cap.

A weaker currency, higher inflation and dropping stock prices

While the public sector is publishing a surplus, the Brazilian economy is simultaneously dealing with a weaker currency, higher inflation and falling stock market prices.


On Monday 2 May 2022, a sharp decline in the Brazilian real (pl. reais; sign: R$; code: BRL) could be observed as the USD climbed ahead of an expected U.S. interest rate hike. The U.S. Federal Reserve is having a policy meeting this week, and the public is expecting to see the U.S. central bank up interest rates by half a percentage point on Wednesday.

The BRL shed 2.5% and is thus still well above the psychologically important five-to-the-dollar mark. This is the lowest point for the BRL in almost seven weeks.

According to Rabobank cross-strategist Christian Lawrence, not just Brazil but all Latin American countries will have their currencies impacted by dollar dynamics this week rather than by local issues.

Inflation in Brazil

Brazil´s inflation reached a 27-year-high in mid-April and Brazil´s central bank is under increased pressure to raise its key lending rate by one percentage point, something which would bring it up to 12.75%. A policy meeting will take place on Wednesday (May 4, 2022).

Falling stock prices

This week, the Bovespa Index (Índice Bovespa) fell to its lowest point in over three months, chiefly dragged down by lower oil prices. This drop in oil prices was in turn linked to concerns over weak economic growth in China, as China is the world´s main oil importer. On the international oil market, these concerns proved to be stronger than any fears of the European Union imposing a ban on Russian crude oil imports.

The Bovespa Index, also known as Ibovespa, is a weighted benchmark index comprised of about 84 stocks traded on the B3 (Brasil Bolsa Balcão). Combined, these stocks account for a majority of the market capitalization in the Brazilian stock market.