Explaining Brazil #236: A new fiscal anchor to navigate the storm

Markets eagerly await the Brazilian government’s proposal for a new fiscal anchor to replace its current spending cap, which has been in place since 2016 but was made redundant by the previous administration’s attempt to win re-election by excessive spending.

The government has kept its cards close to its chest to shield the proposal from criticism before all the details are ironed out. Finance Minister Fernando Haddad on Monday called recent leaks about the issue “inappropriate.” 

But, just minutes after Mr. Haddad spoke, Vice President Geraldo Alckmin gave the markets a spoiler. He said on Monday the new anchor should be based on a tripod consisting of keeping the debt curve under control, ensuring primary surpluses, and controlling public spending. But Mr. Alckmin went into no further detail.

Listen and subscribe to our podcast from your mobile device:

Spotify, Apple Podcasts, Google Podcasts, Deezer

This episode used music from Uppbeat. License codes: Aspire by Pryces (B6TUQLVYOWVKY02S), Fairytales by Danijel Zambo (VUV8J1UGPPAIQV6E), Implicit by Eric Haley (5YUVKXINODM24HL4).

In this episode:

• Mario Sergio Lima is a senior Brazil analyst at Medley Global Advisors and a monthly columnist for The Brazilian Report. Between 2006 and 2021, he worked for O Estado de S.Paulo, Folha de S.Paulo, and Bloomberg.

Background reading:

• Vice President Geraldo Alckmin gave markets the first spoilers of the government’s new fiscal anchor: explaining its three core principles. This week, however, Lula postponed the fiscal anchor announcement to April.
• Recent data paint a not-so-pretty picture for the Brazilian economy, raising the stakes for the fiscal anchor project, as we explained in our Brazil Daily newsletter of March 15. Especially after a survey of 82 Brazilian investment fund executives showed how deeply rooted is the markets’ mistrust of Brazil’s recently inaugurated government.
• Almost three months into the Lula government, Brazilian investors’ major concern is no longer the finance minister, but those who seek to undermine him, writes Oliver Stuenkel.
• The House has set up its standing committees and will begin deliberations and votes. This will be a chance for the Lula government to finally gauge the size of its ruling coalition, writes Mario Sergio Lima.

Do you have a suggestion for our next Explaining Brazil podcast? Drop us a line at podcast@brazilian.report

Don’t forget to follow us on Twitter and Facebook.

The post Explaining Brazil #236: A new fiscal anchor to navigate the storm appeared first on The Brazilian Report.