Delays and disappointments on revenue-boosting measures have made it harder for Brazil's government to balance its budget and erase a primary budget deficit by 2024, as promised in a new fiscal framework.
Those proposed budget rules have calmed investors nervous about an explosion of public spending, but weak returns from one-time revenue measures, falling tax figures and rising 2023 deficit targets show the government still has work to do.
In March, while proposing its new fiscal rules, the government said it was working to cut its deficit to 50 billion reais ($10.4 billion) this year. By May, officials were talking of an informal 2023 deficit target of 100 billion reais.
Last month, weak tax revenue led the Finance Ministry to raise its deficit projection for this year to 145 billion reais, or 1.4% of gross domestic product (GDP).
Among the tax measures that have most disappointed is a debt renegotiation program with the country's tax service, whose deadline was extended this week to late December.
That program was slated to raise 50 billion reais this year, but government data showed that from February to June, it raised just 2.5 billion reais, or 5% of the target.
The program "may in fact show little returns," said one Finance Ministry official on condition of anonymity, adding that the tax debt renegotiations were among plans unveiled in the first weeks of the new government in January, when officials publicly recognized they were setting ambitious goals.
"It was one of the items that the Finance Ministry did not give much weight, precisely because it knew it could frustrate," the official said.
The Finance Ministry did not respond to requests for comment.
Under new fiscal rules still pending congressional approval, the government would need to erase its budget deficit in 2024, with a tolerance margin of 0.25 percentage point of GDP.
Yet the government has not proven to investors that it can move the needle meaningfully on revenue.
Last week, the Finance Ministry released a measure to tax online sports betting in the country. Once expected to generate annual revenue of 12 billion to 15 billion reais, officials said they now expect the measure to bring in just 2 billion reais in 2024.
"The bulk of the measures have not yet had a concrete effect," said Felipe Salto, chief economist at Warren Rena, who expects a primary deficit of 0.9% of GDP this year.
"It would be very important for the government to start releasing technical notes and databases," he said. "This would help to give greater weight, especially to the promise to zero the deficit next year."
($1 = 4.7925 reais)
