Brazil's August Deficit Narrower-But The Real Test Is Structural

(MENAFN- The Rio Times) Brazil's central government ran a primary deficit of R$15.564 billion ($2.9 billion) in August, a smaller gap than markets expected and an improvement on August last year's R$22.162 billion ($4.2 billion).

Net revenue rose to R$174.192 billion ($32.9 billion), up 11.1% in real terms, while spending reached R$189.756 billion ($35.8 billion), up 5.3% in real terms.

On a 12-month basis, the deficit stands at R$26.6 billion ($5.0 billion), roughly 0.25% of GDP-right at the edge of the government's fiscal rule, which targets a balance around zero with a tolerance band.

The story behind the headline is where it gets interesting. August looked better mainly because of one-off cash: dividends and profit transfers surged 182% to R$9.828 billion ($1.9 billion), led by R$6.8 billion ($1.3 billion) from BNDES and about R$1.2 billion ($0.2 billion) from Eletrobras.

That help won't reliably repeat. Meanwhile, the pressure point is structural-Social Security. While the Treasury and Central Bank together posted a modest surplus of R$3.456 billion ($0.7 billion), the General Social Security Regime ran a R$19.0 billion ($3.6 billion) deficit.



Spending also climbed in three areas: Social Security benefits (+R$2.2 billion/$0.4 billion), payroll and social charges (+R$2.2 billion/$0.4 billion), and discretionary outlays (+R$8.1 billion/$1.5 billion).

Context matters for outsiders watching Brazil's trajectory. July was very weak, with a R$59.1 billion ($11.2 billion) deficit; August's rebound partly reflects timing quirks.

The month still beat forecasts for a deeper R$20–21 billion ($3.8–$4.0 billion) hole, which helps sentiment. But investors will judge the trend, not a single datapoint: Can Brasília keep the 12-month balance inside the rule without leaning on extraordinary dividends?

Why it matters beyond Brazil: Credible fiscal control anchors inflation expectations and interest-rate paths in Latin America's largest economy, shaping capital flows and corporate funding across the region.

August shows the guardrails are holding. The next chapters-pension dynamics, steady tax bases, and disciplined ministry execution-will tell whether the improvement lasts without financial windfalls.

MENAFN30092025007421016031ID1110129389