Business · Economy · 10 hrs ago
Economist urges Brazil to announce a gradual fiscal plan soon
After Luiz Inácio Lula da Silva’s re-election, investors are looking for clues about the government’s economic policy.
Felipe Salto, chief economist at Warren Investimentos, says Brazil should announce a credible plan to improve its public finances soon.
He says the plan can be phased in over four years, rather than relying on abrupt cuts.
Brazil’s primary deficit fell from 2.4% of GDP in 2023 to about 0.4% in 2024, but Salto says the government had promised a surplus under its fiscal framework.
He points to rapid growth in mandatory spending, as well as tax breaks, high salaries and congressional budget amendments, as areas the plan should address.
Salto says Brazil should aim for a primary surplus of 2% of GDP in two or three years to help stabilise its debt relative to the economy.
He argues that announcing the plan soon would signal fiscal responsibility while protecting social, health and pension policies.
Economist Felipe Salto says Brazil’s government should announce a credible fiscal adjustment plan soon, while spreading its implementation over four years.
Salto said the public finances are challenging but not beyond repair.
He called for measures to limit mandatory spending growth, reduce tax expenditures, curb excessive salaries and control parliamentary amendments.
His proposed target is a primary surplus of 2% of GDP within two or three years to help stabilize the debt-to-GDP ratio.
He said growth has been slowing since mid-2025, while high real interest rates and higher international rates add to the pressure.
- Who
- Felipe Salto, chief economist at Warren Investimentos, is urging the government to act.
- What
- He says it should announce a fiscal adjustment plan soon and spread its implementation over four years.
- When
- After Luiz Inácio Lula da Silva’s re-election; an exact date for the proposed announcement is not stated.
- Where
- Brazil.
- Why
- Salto says a credible plan is needed to restore the primary surplus and stabilize the debt-to-GDP ratio.
This story does not have two clearly opposing sides.
The primary deficit was 2.4% of GDP.
Complementary Law 200, known as the new fiscal framework, was established.
The primary deficit fell to about 0.4% of GDP.
Brazil’s economic growth began slowing, according to the Central Bank’s IBC-BR indicator.
Salto urged the government to announce a fiscal adjustment plan quickly.
- Economist
- Felipe Salto, chief economist at Warren Investimentos
- Primary deficit in 2023
- 2.4% of GDP
- Primary deficit in 2024
- About 0.4% of GDP
- Proposed primary surplus target
- 2% of GDP within two or three years
- Proposed plan period
- Four years
What people are saying
The fiscal adjustment does not need to be done overnight, but the plan needs to be announced quickly to show that the government is fiscally responsible.
This plan should be spread over four years and should be a commitment made from the first day.
The problem is that the government had promised a surplus.