Podcast

Explaining Brazil #236: A new fiscal anchor to navigate the storm

Markets are patiently waiting to hear the Lula government's proposal for a new fiscal anchor to replace Brazil's lame-duck spending cap. We discuss what the plan may look like and how it would be received

Markets eagerly await the Brazilian government’s proposal for a new fiscal anchor to replace its current spending cap, which has been in place since 2016 but was made redundant by the previous administration’s attempt to win re-election by excessive spending.

The government has kept its cards close to its chest to shield the proposal from criticism before all the details are ironed out. Finance Minister Fernando Haddad on Monday called recent leaks about the issue “inappropriate.” 

But, just minutes after Mr. Haddad spoke, Vice President Geraldo Alckmin gave the markets a spoiler. He said on Monday the new anchor should be based on a tripod consisting of keeping the debt curve under control, ensuring primary surpluses, and controlling public spending. But Mr. Alckmin went into no further detail.

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This episode used music from Uppbeat. License codes: Aspire by Pryces (B6TUQLVYOWVKY02S), Fairytales by Danijel Zambo (VUV8J1UGPPAIQV6E), Implicit by Eric Haley (5YUVKXINODM24HL4).

In this episode:

  • Mario Sergio Lima is a senior Brazil analyst at Medley Global Advisors and a monthly columnist for The Brazilian Report. Between 2006 and 2021, he worked for O Estado de S.Paulo, Folha de S.Paulo, and Bloomberg.

Background reading:

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