Eoin Treacy's view -
Guedes, who spoke shortly before markets closed, said the government also mulls bringing forward a spending cap revision scheduled for 2026.
“We want to be a popular, not a populist government,” he said, adding that the country must remain committed to fiscal responsibility.
Brazilian assets tumbled the most in the world on Tuesday on reports the government would breach the country’s spending cap rule, in place since 2017, to finance the new social program.
The cap is seen by economists and investors as one of the key pillars of Brazil’s fiscal policy, keeping public finances from derailing by limiting spending growth to the inflation rate of the previous year. The government bypassed the rule in 2020 and 2021, getting one-time exemptions approved in congress to accommodate pandemic-related expenses.
One of the central themes of democracy is the loser of an election leaves office peacefully and handovers to new governments are reasonably smooth. When that pattern does not go according to plan, as in the US earlier this year, the strength of a nation’s institutions is tested. The USA passed that test, even though no one ever considered it would ever need to be tested.
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