MercoPress. South Atlantic News Agency

Rousseff tells Congress it will miss the fiscal target; resigning minister calls for a “shock of credibility”

Dilma's request for a more flexible target reflects the weak state of Brazil finances after a series of tax cuts and high public spending reduced savings

Brazilian President Dilma Rousseff on Tuesday asked Congress to allow the government to deduct all of its investments and tax exemptions from a key 2014 fiscal target, effectively lowering a goal that it will miss for the third straight year.

 In a new budget bill sent to Congress, the Rousseff administration did not quantify those deductions. In the original 2014 budget legislation, it was allowed to deduct a total of 67 billion reais (26.2bn dollars), or more than 1% of GDP, from its primary goal.

The primary surplus, or revenue minus expenditures before debt payments, is considered a crucial measure of a country's capacity to repay debt.

The request for a more flexible target reflects the weak state of the government's finances after a series of tax cuts and high public spending reduced savings. In the first nine months of the year, tax exemptions and investments amounted to about 123 billion Reais, according to data from the Treasury.

Since Rousseff took office in 2011, Brazil's public finances have declined sharply, pressuring inflation and putting the country in the sights of ratings agencies. Brazil's primary surplus target for this year had been 99 billion Reais, or equal to 1.9% of GDP.

The situation was further exposed by Brazilian minister Marta Suplicy who resigned on Tuesday and urged President Rousseff to appoint an “independent” new economic team to “restore confidence and credibility” among investors, in an unusual public critique from an ally.

Culture Minister Marta Suplicy, a former mayor of Sao Paulo and a senior figure in the ruling Workers' Party, had been expected to leave government as Rousseff sets up a new Cabinet following her narrow re-election victory on Oct. 26.

But her resignation letter contained unexpected advice on the biggest policy question facing Rousseff: who will succeed current finance minister Guido Mantega in her second term.

Many investors blame Mantega and Rousseff, herself a trained economist who relishes making financial policy decisions, for interventionist policies that have caused the economy to grow less than 2 percent a year since she took office in 2011.

Suplicy urged Rousseff to “choose ... an independent economic team, experienced and proven, that will recover the confidence and credibility of your government, and that is, above all, committed to a new agenda of stability and growth for our country.”