Business

Brazil’s fiscal prospects to remain bleak through 2023

The Bolsonaro government's decision to breach federal spending cap rules and uncertainty surrounding the 2022 election leaves Brazil's fiscal outlook less than rosy for the coming years

fiscal austerity brazil budget
Photo: Jaromir Urbanek/Shutterstock

For much of the end of 2021, markets showed great concern with Brazil’s fiscal balance. The main reason for this distress came in the shape of a constitutional amendment bill allowing the federal government to cap its court-ordered debt repayments (precatórios) for this year, freeing up space on the budget and essentially making a mockery of Brazil’s federal spending cap.

While seeking assurances that the precatórios bill was a one-off, the markets’ worry is that the measure sets a dangerous precedent and renders spending cap rules useless.

On the one hand, Economy Minister Paulo Guedes continues to tell investors...

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