Brazil's 2027 Pre-Salt Oil Auction Could Bring in $4.4B

Brazil's government expects to raise 22.4 billion reais ($4.4 billion) from an extraordinary pre-salt oil auction in 2027, according to an annex to the budget bill submitted to Congress, a revenue source that will be crucial to achieving its goal of posting its first effective primary surplus in years.

The government of President Luiz Inacio Lula da Silva, who will seek re-election in October, projected an 18.6 billion reais primary surplus next year, equivalent to 0.13% of gross domestic product. If achieved, it would mark Brazil's first primary surplus since 2022.

Government officials argue, however, that the 2022 result was distorted by the postponement of part of the government's court-ordered debt payments, after then-President Jair Bolsonaro's administration approved a constitutional amendment capping those expenditures - which Lula later reversed.

Finance Minister Dario Durigan has said Lula will leave the next administration, regardless of who wins the election, with a balanced budget that does not depend on additional measures requiring Congress' approval.

In practice, however, the auction of oil from pre-salt, an offshore area in Brazil, will be pivotal to meeting the fiscal target, as the expected proceeds exceed the projected primary surplus itself.

A government official, speaking on condition of anonymity,