LatinNews Daily - 30 March 2023

BRAZIL: Government confirms details of new fiscal framework

On 29 March, Brazil’s finance minister Fernando Haddad met President Luiz Inácio Lula da Silva, along with other senior government officials, to confirm the details of a proposal for a set of fiscal responsibility rules.


Speaking to journalists after the meeting, the minister of institutional relations, Alexandre Padilha, stated that the fiscal rules need to be approved to bring “certainty for those who want to invest in the country” and because it will affect budget planning. This meeting to hash out the details of the framework comes after months of preparation and speculation on how the government plans to balance fiscal responsibility with its spending on social programmes and curb the country’s fiscal deficit.

  • Some details discussed in the meeting have been revealed by government sources to the national and international press, including the news outlets g1 and CNN Brasil, and the news agency Reuters. The proposal could include a rule where spending cannot grow by more than 70% of the government’s revenue. The reports also revealed the framework’s targets: to have a zero primary deficit in 2024 followed by a fiscal surplus in the following years.
  • The concerns about the current administration’s fiscal discipline came even before Lula’s inauguration, when his incoming government managed to gain congressional approval for a waiver to the so-called constitutional spending ceiling, a decision which rattled financial markets and stoked fear of the country’s fiscal deficit ballooning. Haddad’s first few months in office have involved trying to ease the concerns in the markets, a task complicated by internal tensions in the government’s tug-of-war over balancing social and fiscal responsibility.  
  • A recent boost to the government’s proposed fiscal framework came from the country’s central bank (BCB), whose monetary policy committee (Copom) had assessed the plans and stated that a “solid and credible fiscal framework might result in a more benign disinflationary process”, a surprisingly approving tone as the BCB has been at odds with the government over interest rates.

Looking Ahead: The framework still needs to be discussed by congress. Haddad has already presented the proposal to the president of the lower house, Arthur Lira, and is due to meet the senate president, Rodrigo Pacheco. Haddad also has a press conference scheduled today, in which he is expected to discuss the meetings.

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