Infographic: A look at key figures affecting the economy and growth in Brazil.
Petrobras, Brazil’s state-controlled oil company, slashed its refining investment program through 2018 by $26 billion, to $38.7 billion, as it tackles debt and pricing challenges. Petrobras has sold fuel at subsidized rates since 2011, as part of the government’s plan to curb inflation, expected to reach 5.9% this year. Last November, Petrobras’ board approved its first price hike in nine months. The company’s refineries have posted $37 billion losses since 2011. Analysts worry that, with $114.3 billion in debt, Petrobras will be unable to fund the reduced investment budget, for which it expects to borrow more than $12 billion annually through 2018. Petrobras is counting on development of pre-salt oil finds to boost revenues and position Brazil as a major crude exporter. The company announced in March that it found two new pre-salt wells at fields off the coast of Rio de Janeiro state.
The government plans to cut nearly $19 billion in discretionary spending this year in a bid to restore investor confidence and avoid a ratings downgrade. Finance minister Guido Mantega announced a new 2014 primary surplus target of 1.9%. Brazil missed its 2.3% target last year, despite a downward revision from 3.1%. The target may be missed again, as authorities are unlikely to aggressively curb spending in an election year, particularly as president Dilma Rousseff seeks reelection. The government’s 2.5% GDP growth forecast is also unrealistic, as private estimates put it closer to 1.3%. Standard & Poor’s revised its rating outlook to negative last June, prompting concerns of a possible downgrade and spooking investors. S&P rates Brazil at BBB, two notches into investment-grade territory.