Good morning! With little money to spare, the government could face a shutdown soon. Breaking down Jair Bolsonaro’s TV interview. Rising tensions between U.S., China to affect Brazil.
The risk of a government shutdown in Brazil
President Jair Bolsonaro could face a government shutdown in his first year in office. The problem is the so-called “golden rule,” which stipulates that Brazil may 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.
To avoid it, the government must convince Congress to approve a BRL 248bn increase to its debt ceiling—a demand that was already included in the 2019 budget proposal, drafted by the previous administration. Without that additional money, however, there will be no funding for these so-called basic expenses, which include social security benefits.
For the past 30 years, Brazil’s basic expenses have grown at a faster pace than the GDP—mainly due to pension spending on a rapidly aging population. Last year, a proposal to eliminate the golden rule was struck down by Congress, which interpreted it as a government attempt to get a...