Weekly Report - 28 October 2021 (WR-21-43)

BRAZIL: Unease over lax approach to fiscal rules

For two years, in 2020 and 2021, exceptions were made to allow the Brazilian government to spend above the ‘teto de gastos’ – a constitutionally mandated spending cap which prevents government spending from increasing in real terms from one year to the next – to respond to the public health and socio-economic impacts of the coronavirus (Covid-19) pandemic. However, there are now clear indications that President Jair Bolsonaro and his economy minister, Paulo Guedes, plan to find new ways to bypass the spending cap again next year – an electoral year. This has sent ripples of unease through the Brazilian markets.

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