Brazil: Key budget decisions are on the way soon


Published on Wednesday 27 March 2024 Back to articles

Brazil’s Finance Minister Fernando Haddad

As the March 2024 issue of Brazil Focus went to press, the government appeared poised to take some key budget decisions. It was rumoured that Finance Minister Fernando Haddad was about to freeze a small part of the 2024 spending budget — some BRL3 billion or US$603 million — while re-affirming the government’s commitment to achieving a zero primary budget deficit. The latter will be a difficult task because last year’s primary deficit was 2.3% of GDP. Broadly speaking Haddad must find some way of balancing the hoped-for increased revenues from last year’s tax reforms against his cabinet colleagues’ demands for greater spending in order to boost economic growth ahead of the October 2024 municipal elections. Fear of losing popular support already appears to have triggered a decision to postpone the planned income tax reforms until 2025, after the municipal elections.

The issues facing Haddad are tricky. Federal revenues have indeed begun to rise which is a cause for optimism. Year-on-year tax collection in February rose by a record breaking 12% in real terms. The Federal Revenue Service says that tax receipts in the first two months of 2024 were the highest in 25 years. Recently introduced taxes on investment funds are playing an important role. But spending is also rising because of social programmes and a higher minimum wage. The latter also raises state pensions through index-linking. In an election year the government is eager to boost public infrastructure investment so the revenue increase may still fall short of what is actually needed. The Independent Fiscal Institution (IFI) — an audit office that reports to the Senate — calculated that despite rising, revenues in the first two months were BRL12 billion (US$2.4 billion) below the government’s own projections. IFI continues to accuse Finance Ministry officials of over-optimism: it forecasts that a balanced primary budget will not be reached. 

The government has, however, received a boost from a different quarter. The Supreme Court has changed its interpretation of pension law modifications dating back to 1999, meaning that pensioners no longer have the right to choose the most generous among various different pay-out schemes. Up to BRL480 billion (US$95.9 billion) of government liabilities is at stake but there are doubts over how the savings might be calculated and apportioned. A ministry official described the ruling as ‘a significant win for the country.’

Last year’s tax reforms focused on simplifying Brazil’s complex and overlapping sales taxes and applying levies on foreign investment income. The overall tax structure is regressive with a focus on taxing consumption. Government officials have wanted to correct this by shifting the balance to rely more on progressive income taxes. Haddad has said that his original instructions from President Luiz Inácio Lula da Silva (a.k.a. Lula) were ‘put the poor in the budget and make the rich pay more income tax.’ However there seems to be a realisation that powerful lobby groups will oppose this and that trying to make the changes in the middle of an election campaign will be bad political timing. While there may be some smaller pieces of tax legislation this year — such as a bill on new financial asset taxes — income tax reform is now not expected until 2025. 

President Lula has remained optimistic. In early March he said ‘You realise that revenues are increasing beyond what many people expected. Of course, we have a spending cap, and when we have more money we’ll have to discuss this spending cap with the Chamber of Deputies and the Senate, and we’ll see how we can use more money to do more for the people.’ He also cited a string of recent corporate investment announcements. Lula said, ‘I have never experienced the moment of optimism for Brazil that we have today around the world.’ According to the Central Bank’s Focus survey of private sector economists, the consensus is that 2024 will conclude with a primary budget deficit equivalent to 0.75% of GDP, while the full nominal budget result including debt servicing will be a deficit equivalent to 6.8% of GDP.

This excerpt is taken from Brazil Focus, our monthly intelligence report on Brazil. Click here to receive a free sample copy.

The March 2024 issue of Brazil Focus also includes the following:


  • Key budget decisions are on the way soon
  • Senior officers implicate Bolsonaro in attempted coup
  • Lula’s popularity stable but worries over rising disapproval rate

Taking the Pulse

  • Brazil’s consumers in confident mood
  • Most industrial sectors plan to invest in 2024

Foreign Relations

  • Middle East governments seek to build relationship with Brazil


  • Back to the ‘War on Drugs’
  • New development in the Marielle Franco case
  • Police target Comando Vermelho in Rio’s favelas

Economy & Business

  • February inflation above expectations
  • Economic growth surprisingly higher than predicted
  • Expansion plan agreed for Santos Port
  • Brazil consolidates its position as key food exporter
  • China-backed consortium wins passenger rail contract
  • More legal pain for Vale over Mariana disaster


  • Deforestation falls in the Amazon but up in the Cerrado

Energy Sector

  • Petrobras shares drop over dividend confusion
  • Paraguay wants US$22.60 per KwH for Itaipú energy
  • Hydro-electric power squeeze on the cards again?
  • Braskem in the red
  • US oil company moves into Brazil

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