Brazil to hike surplus target above 4 pct -reports

www.forbes.com Reuters, 01.26.03, 2:11 PM ET

SAO PAULO, Brazil, Jan 26 (Reuters) - Brazil's government is expected to announce in the coming days that it will target a public sector primary surplus of above 4 percent of GDP this year in its latest move to build confidence among investors.

Local media reported on Sunday that Brazilian Central Bank President Henrique Meirelles told economists at the World Economic Forum in Davos, Switzerland, that Brazil would target a surplus above the 3.75 percent of gross domestic product it had agreed on with the International Monetary Fund.

That new target, at least three newspapers said, should be higher than 4 percent.

Shying away from details, Finance Minister Antonio Palocci told reporters Brazil would target a fiscal surplus that would guarantee its ability to continue making payments on its heavy, $260 billion public debt.

"Independent of our agreement with the IMF, the country is interested in planning its debt payments so that there are no doubts over its sustainability," Palocci said.

Investors battered Brazilian financial markets last year, worried the center-left administration of President Luiz Inacio Lula da Silva would mismanage the country's debt.

But repeated reassurances by Lula and his economic team that they will keep spending and inflation under control have helped rebuild confidence in Brazil's economy, which is Latin America's largest. Any increase in the surplus target should only further bolster the growing optimism, economists say.

Brazil is expected to have closed 2002 with a primary surplus of about 4 percent, above the 3.88 percent it agreed on with the IMF in last year's $30 billion aid package. The surplus target excludes debt payments.