Breaking News
Get 40% Off 0
Is NVDA a 🟢 buy or 🔴 sell? Unlock Now

Explainer-What do Lula and Bolsonaro propose for Brazil fiscal policy?

Published Oct 10, 2022 11:50AM ET Updated Oct 10, 2022 12:00PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. Combination picture of Brazil's President and candidate for re-election Jair Bolsonaro during a news conference at the Alvorada Palace in Brasilia, Brazil, October 4, 2022 and Brazil's former president and presidential frontrunner Luiz Inacio Lula da Silv

By Bernardo Caram

BRASILIA (Reuters) - Both of Brazil's presidential candidates, President Jair Bolsonaro and former President Luiz Inacio Lula da Silva, have proposed changes to the constitutional spending limit that defined fiscal policy in Latin America's biggest economy for the past six years.

The following are some of their policy proposal differences.


Brazil amended its constitution in 2016 to establish a fiscal 'ceiling' that only allows spending by the federal government to grow as much as inflation in the prior year.

Financial markets have treated the constitutional spending cap as Brazil's principal fiscal anchor in recent years, but politicians across the spectrum criticize it as a budgetary straightjacket during economic crises.

Congress has made exemptions and modifications to the spending cap a half dozen times under Bolsonaro, eroding the rule's credibility, according to many economists.


The president has supported repeated exceptions to the current spending cap, and said his Economy Minister Paulo Guedes is working on alternatives to be implemented in a second term.

"There are some changes you can make to the spending cap, as the team of Paulo Guedes has proposed. But we'll leave that to discuss after the elections," he said in a June interview.

Guedes said last month that the spending cap should be modified to allow, for example, revenue from the privatization of state firms to fund expanded welfare programs.

There are two main proposals under development in the Economy Ministry, according to officials who requested anonymity to discuss them. Both proposals would target public debt over gross domestic product (GDP) as a medium-term fiscal anchor to allow more short-term fiscal flexibility.

Under a proposal developed by Treasury staff, public spending could grow a set amount above inflation as long as gross public debt remains below a certain share of GDP.

The ministry's Special Advisory of Economic Studies has put forth a more flexible alternative in which government spending could grow above inflation, depending on both the rate of economic growth and the gross-debt-to-GDP ratio. The rule would also open room for more spending in the event of a recession, regardless of public debt levels.


Lula, Bolsonaro's leftist challenger, has been more explicit in his criticism of the current spending cap. But he has been coy when pressed for details of what new fiscal rules he would propose.

"I'm against the spending cap," he told a gathering of economists last month. "If you're responsible, you don't need a spending cap."

Economists from Lula's Workers Party are looking at two main proposals that would allow more public spending to jumpstart economic growth, while still showing a commitment to fiscal discipline, two senior aides told Reuters.

One proposal involves a target range for Brazil's primary surplus, so the government can spend more in an economic downturn. Currently, the primary budget target is fixed, which narrows the government's options for counter-cyclical policies.

A second proposal would limit spending growth to inflation plus some other unspecified indicator, allowing a real increase in government spending.

Lula also responds to questions about fiscal responsibility by pointing to his record as president. Brazil posted budget surpluses every year of his 2003-2010 presidency, due in part to strong prices for its commodity exports.

However, public sector outlays eventually outpaced revenue under his Workers Party successor, former President Dilma Rousseff. A lending spree by state banks also damaged fiscal credibility, eventually contributing to a deep recession.

Rousseff was impeached for breaking fiscal rules. Her replacement, former President Michel Temer, passed the country's constitutional spending cap to re-anchor fiscal policy.

Explainer-What do Lula and Bolsonaro propose for Brazil fiscal policy?

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email