Brazil is undergoing an extremely sensitive economic moment. Public debt is rampant, investments are down, and the government doesn’t seem to be able to rationalize public spending. According to the Treasury Department, the public sector registered a BRL 13.5 billion primary deficit in June alone. Meaning that, even without taking into consideration the interest rates over the debt, the federal government’s revenues is not enough to pay for its expenses.
The next president will step into office already facing the possibility of not being able to meet the so-called “golden rule,” which stipulates that Brazil can only increase its debt to pay for investments – the money can’t be used for basic expenses, such as wages. Breaking this rule is an impeachable offense.
Due to the continuous deficits that have haunted the central government since 2014, breaking the golden rule appears inevitable in the opinion of economists at the Ministry of Finance. To avoid the worse, the administration is studying “legal alternatives” which would include amending the Constitution. Another solution could be a bill authorizing the government to break the rule during a specific time frame. But a vote like that has no chance of passing before the October election.