Fiscal accounts for the semester, Chapman’s financial proposals and their implications, Mulino’s announcements, and important appointments to come
The fiscal accounts for the first semester, published last week, align with our projections for a Non-Financial Public Sector (NFPS) deficit close to 8% of semiannual GDP according to our estimates, reaching 3.96% of the projected GDP for the entire year. Economy and Finance Minister Felipe Chapman announced that the Fiscal Law target (2% of GDP) will not be met. Although he did not provide details on a proposal to adjust the parameters, we estimate that the deficit will be no lower than 4.5% this year.
The Ministry of Economy and Finance (MEF) obtained approval to negotiate timely financing exclusively with Treasury Notes of up to US$6 billion in the local market, and to contract US$3 billion for short-term liquidity needs to offset the seasonality of fiscal revenues. Although this approval does not imply that all this availability will be used this year, it is a step towards diversifying financing sources and moving away from the Eurobond market, at least in the second half of the year. We believe the strategy is to buy time for international markets to incorporate into their evaluations the reforms that President Mulino has already begun to announce.
President Mulino announced the appointment of actuary Dino Mon as Director of the Social Security Fund (CSS). Mon is a proponent of structural reforms in the pension system and has initiated the consultation process to reform the CSS. Mulino mentioned that the reform project will be presented to the National Assembly in October.
We await the appointment of the Comptroller General by the Assembly (which is constitutionally responsible for doing so), a key figure for improving the transparency of public accounts and signaling a commitment to reducing corruption in state management.
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