Brazil: The 2012 budget

The government's proposal for the 2012 budget, submitted to Congress on 31 August, and amounting to R$2.2 trillion, envisages a 13.6 per cent increase in the minimum wage, from R$545 to R$619.21, causing an increase in federal expenditures of R$21.5 billion, largely derived from social security payments.

The increase in the minimum wage is part of Lula's legacy: it was he who introduced a new progressive system for its calculation, based on a combination of cumulative inflation in 2011 (5.7 per cent) and GDP growth in 2010 (7.5 per cent).The budget proposal – contrary to the government's announced efforts at fiscal tightening with a view to a reduction in the Selic interest rate – makes possible an increase in public expenditures, including a target of R$165.3 billion for investments, roughly two-thirds of which is by state enterprises (an 8.3 per cent increase over the figures for 2011).

Most analysts are revising their projections for Brazil's GDP growth in 2011 as a function of deceleration in economic growth in the United States, the European Union, and China. The Focus survey of 100 financial institutions polled by the Central Bank in late August reduced its average estimates, from 4 to 3.7 per cent this year, and from 4–6 to 3–5 per cent in 2012.m Morgan Stanley , UBS , and leading Brazilian consultancies MB Associados and Tendências are all downgrading their estimates, with slight variations.

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© 2011 Menas Associates