Brazil’s election-year fiscal debate is shifting from President Luiz Inacio Lula da Silva’s stimulus measures to a set of costly bills moving through Congress, according to economists cited by CNN Brasil.
Felipe Salto, chief economist at Warren Investimentos and a former finance and planning secretary for the state of Sao Paulo, said it is normal for governments to favor expansionary measures in an election year. Lula’s administration has advanced what Brazilian political shorthand calls a “package of benefits,” including credit lines for drivers to renew vehicles and an income-tax exemption for people earning up to R$5,000 a month.
CNN Money estimated that Lula’s package could inject more than R$200 billion into the Brazilian economy in 2026. But Salto argued that the larger fiscal danger lies in Congress, where lawmakers are considering so-called “pautas-bomba,” or “bomb bills,” a Brazilian term for proposals that carry large budget costs and can destabilize public accounts.
“The mortal sin is in Congress,” Salto told CNN Brasil, saying the bills have “very relevant fiscal effects.” He said Brazil’s three branches of government need an understanding to prevent approval of spending commitments that cannot later be conditioned or offset.
Warren Investimentos estimates that if all the major bomb bills under consideration were approved, they could cost almost R$1.7 trillion through 2035, including monetary correction. Salto said that while many measures sent by the executive branch seek some form of compensation, congressional bomb bills tend to create fiscal effects that accumulate over time.
One recent dispute involved proposed changes to the Simples Nacional, Brazil’s simplified tax regime for small businesses. The government had sent Congress a bill to raise the annual revenue ceiling for individual microentrepreneurs, known as MEIs, from R$81,000 to as much as R$140,000 by 2028. But broader changes to small-business brackets could cost more than R$40 billion, according to calculations by the Finance Ministry team cited by CNN Brasil.
The measures have also revived tension between Congress and the judiciary. CNN Brasil reported that three Senate-approved bills with estimated costs in the hundreds of billions of reais are expected to face challenges before the Supreme Federal Court, Brazil’s highest court. In a June session, senators approved debt renegotiation for rural producers, raised the wage floor for doctors and dental surgeons, and loosened retirement rules for community health workers and disease-control agents.
The concern comes as Brazil’s public-debt outlook remains fragile. A study by the Budget Consultancy of the Chamber of Deputies projects that federal public debt could exceed 100% of gross domestic product between 2032 and 2035.
Marcus Pestana, executive director of the Senate’s Independent Fiscal Institution, said Brazil has an “explosive” debt dynamic for an emerging economy. He argued that the country would need to spend less than it collects and generate public savings to pay interest and stop debt growth. Fiscal weakness, he said, feeds into inflation, high interest rates and slower economic growth.
The Chamber study describes Brazil as facing “fiscal fatigue,” meaning it is losing the ability to stabilize debt through primary surpluses, the budget balance before interest payments. Paulo Bijos, the consultant who authored the study, said Brazil appears to be reaching resistance to further tax increases while spending pressure is likely to rise because of demographic change.
According to the same analysis, Brazil would need an annual primary surplus of about 2% of GDP, or roughly R$250 billion to R$300 billion, just to halt debt growth. Bijos said the next elected government should present structural fiscal solutions in the 2028 budget guidelines bill.
This is single-source reporting based on CNN Brasil’s account and the estimates and comments it cited.