Portuguese 
English 
Spanish 
6 min of reading 
0 comments 
Public Debt of 78.6% of GDP, Real Interest Rates of 9.74% per Year, Selic at 15% and Exclusions of R$ 330 Billion from the Fiscal Framework Expose Risk of Shutdown Until 2029 and Projection of 100% of GDP in a Decade
The federal government uses accounting maneuvers to keep the public machine running, meet formal targets, and delay a shutdown, while the debt grows, interest rates remain high, and economists project significant fiscal deterioration over the next decade. The following information is from an article by Gazeta do Povo.
Brazil is already operating with real interest rates of 9.74% per year, above inflation, the second highest global rate, surpassed only by Turkey, according to the financial consultancy MoneYou.
Felipe Salto, chief economist at Warren Investimentos and former Secretary of Finance of São Paulo, claims that public debt could reach 100% of GDP in a decade.
-
The institute that trained the greatest aerospace engineers in Brazil has just opened its first campus outside São Paulo after 75 years: ITA Ceará will have R$ 445 million, new courses in energy and systems, and classes are expected to start in 2027.
-
Luciano Hang, owner of Havan, goes to Juiz de Fora after the tragedy in February, brings R$ 1 million, hands out R$ 2,000 cards, and donates up to R$ 15,000 to victims in the region.
-
The Brazilian passport allows legal residence in dozens of countries without the need for a prior visa, and most Brazilians are unaware that they can apply for residency directly upon arriving in nations in South America, Africa, and even Europe.
-
Petrobras sends a message to Brazilian truck drivers after fuel collapse and reveals plan to have 100% domestic diesel.
From November 2014 to October 2025, gross debt soared from 56.1% to 78.6% of GDP, according to data from the Central Bank.
Despite numbers formally aligned with the new fiscal framework, analysts point to accounting manipulation sustained by exclusions and deferrals of mandatory expenses.
Mandatory expenses consume more than 90% of the federal budget and continue to grow, compressing essential investments and operational costs for the functioning of public administration.
Rapid Growth of Debt and High Interest Rates
Samuel Pessoa, a researcher at FGV Ibre, estimates that during Lula’s current term alone, public debt could rise by 11 percentage points.
This increase accounts for half of the cumulative rise since 2014, highlighting the recent acceleration of Brazil’s public indebtedness, according to the researcher.
Pessoa compares inflation to a civil war, defining it as the worst mechanism for resolving distributive conflict after the war itself.
The analogy reflects the severity of the loss of control when the state loses the ability to arbitrate disputes for resources through the public budget.
Budgetary Rigidity as a Structural Obstacle
Samuel Pessoa, Mansueto Almeida from BTG Pactual, and Fábio Serrano, executive director at BTG, point to rigidity and inertia in spending as the core of the fiscal problem.
The structural growth of expenses occurs above inflation, making it difficult to stabilize debt and restore the country’s macroeconomic balance.
Population aging is a central factor in this dynamic, putting persistent pressure on pensions, retirements, and health care spending.
Aging Pressures Pensions and Health
The percentage of Brazilians over 60 years old rose from 5.1% in 1970 to 15.6% in 2022, according to the Brazilian Institute of Geography and Statistics (IBGE).
Projections indicate that this group will reach 37.8% of the population by 2070, increasing mandatory pension and assistance expenses.
This increase reduces fiscal space for public investments and discretionary policies, deepening the structural imbalance of federal accounts.
Minimum Wage Expands Cascade Effect on Spending
The majority of benefits, such as pensions, retirement benefits, and BPC, remain linked to the minimum wage, automatically increasing public spending.
In 2023, the government reinstated a rule for adjustments above inflation when there is economic growth, reinforcing the budgetary cascade effect.
Each real gain in the minimum wage raises mandatory expenses and reduces the margin for essential administrative investments and costs.
Adjustments Fall on Investments and Costs
To meet fiscal targets, the government can only cut investments and administrative costs, which are essential for economic expansion and the daily functioning of the state.
This logic creates a fiscal trap, as the cuts impact precisely the expenses that support growth and service delivery.
Faced with this scenario, the Executive chose to sidestep the structural problem rather than confront it directly.
Accounting Manipulations and Exclusions from the Framework
The maneuvers involve constitutional and legal changes that exclude expenses from the calculation of the primary result and the spending cap.
Constitutional Amendment 136 changed the rules for court orders, excluding part of these judicial debts from the official primary result.
Simultaneously, expenses from the Growth Acceleration Program were removed from fiscal targets, preserving investments outside the formal limit.
Use of State-Owned Enterprises as Expense Vehicles
Both fronts use state-owned companies to execute spending without direct impact on the primary result or the spending ceiling.
Congress authorized the exclusion of up to R$ 5 billion annually in expenditures on Defense and R$ 10 billion in 2026 with state-owned companies.
This last allowance enables support for the Postal Service, increasing spending outside the current fiscal rules.
The total of excluded expenditures since the beginning of the term already exceeds R$ 330 billion, according to official estimates.
Crisis Postponed Until 2029
Luiz Guilherme Schymura from FGV Ibre asserts that the measures postponed the collapse of the public machine from 2027 to 2029.
The temporary relief is classified as a Pyrrhic victory, obtained at a high cost and with adverse effects on interest rates and fiscal credibility.
Research centers and the market converge that real interest rates will remain high for an extended period due to the structural imbalance.
High Selic and the Cost of Debt
The nominal Selic is at 15% per year, the highest level in 19 years, pressuring the cost of financing public debt.
High interest rates consume a growing share of the budget, reducing resources available for investments and essential public services.
Alexandre Manoel from Global Intelligence and Analytics considers the loss of fiscal credibility the main obstacle to sustainable growth.
Brazilian Fiscal Paradox
The government formally complies with fiscal rules and avoids an immediate shutdown, but the debt continues to grow consistently.
This phenomenon results from the recurring primary deficit and high interest rates, reflecting investors’ perception of risk.
Since November 2014, public accounts have registered deficits, with specific exceptions between 2021 and 2023, according to the Central Bank.
In Lula’s third term, only seven of the 33 months until September 2024 had surpluses, according to official data.
The deficit persists because revenues do not match constitutional benefits, while high interest rates exacerbate the fiscal imbalance.
Risk of Public Machine Shutdown
Thiago Sbardelotto, an economist at XP Investimentos, asserts that the collapse of the fiscal framework will occur at some point.
The shutdown results from the exhaustion of discretionary expenses, when more than 90% of the budget is already committed.
Fewer than 10% remain for investments and operational costs, precisely the essential areas for the daily functioning of administration.
Hospitals, schools, police stations, and administrative bodies depend on these expenses to operate regularly.
Concrete Impacts of the Collapse
Marcus Pestana, director of the Independent Fiscal Institution (IFI), warns of stoppages in security, health, and basic infrastructure.
According to Pestana, the Armed Forces, Ibama, Federal Police, and ministries would lack funds for fuel, energy, and materials.
Schymura highlights that the measures push the shutdown back to 2027, the first year of a new presidential term.
However, the relief contributes little to long-term fiscal balance.
Political Bet and Future Risks
The implicit strategy bets on economic growth to alleviate public accounts without deep structural reforms.
With high interest rates, GDP expansion is uncertain and may be insufficient to contain linked expenses.
Reforms such as uncoupling the minimum wage and pension reform are politically sensitive, especially before 2026.
Experts consider the bet too risky in light of the automatic advance of mandatory expenses.
Technical Consensus Ignored
The technical consensus points to pension and assistance expenses indexed to the minimum wage as the core of the fiscal problem.
Sbardelotto advocates for a rediscussion of the minimum wage, uncoupling benefits such as BPC, and reviewing the adjustment rule.
Without structural changes, the growth of debt is likely to continue, even with formal compliance with fiscal rules.
As a precedent, since 2014 the country has experienced recurring deficits, rapidly aging population, and an increasingly rigid budget.
With information from Gazeta do Povo.
-
-
3 pessoas reagiram a isso.