UPDATE 3-Brazil's primary surplus melts in challenge to Rousseff

viernes 31 de octubre de 2014 11:47 GYT

(Adds analyst comment, background)

By Alonso Soto and Luciana Otoni

BRASILIA Oct 31 (Reuters) - Brazil posted its biggest monthly deficit ever in September, underscoring a rapid deterioration of the fiscal accounts that poses the biggest challenge to newly re-elected President Dilma Rousseff's efforts to regain investor trust.

For September, the government posted a primary deficit of 25.491 billion reais ($10.39 billion), its fifth straight monthly gap, it said on Friday. That put Brazil at risk of ending 2014 with its first annual primary deficit in nearly two decades.

The numbers reveal a deterioration in the government's accounts that is worse than markets had feared and will make Rousseff's task harder as she tries to convince investors she will change her policies and put Brazil's fiscal house in order.

After repeatedly denying the need to review Brazil's fiscal targets, Treasury chief Arno Augustin acknowledged on Friday the government will have to lower its primary surplus target of 99 billion reais, an amount equivalent to 1.9 percent of gross domestic product. He said the new target for this year will hinge on expectations for the intake of taxes in coming months.

The primary surplus, or excess of revenue over expenditure before debt payments, is closely watched by markets and serves as a gauge of the country's capacity to repay its loans.

A sharp deterioration of Brazil's finances under Rousseff has put the once-booming economy in the sights of rating agencies and eroded investor confidence in the country.

To appease investors and avoid a credit downgrade the administration plans steep budget cuts next year and measures to reduce public expenditures in the future, government officials told Reuters on Thursday.   Continuación...