Santander Brasil’s chief economist Marco Caruso said Brazil could grow less than 1.3 percent in 2027 without fiscal adjustment, which would rank it last among Latin American peers. He made the remarks on Wednesday at the XXII Encontro Santander América Latina in Madrid.
Fiscal policy at the centre
Caruso said the main short-term problem for Brazil is fiscal. “In the short term the main problem is fiscal, fiscal, fiscal,” he said, adding that the 1.3 percent growth projection for 2027 carries a strong downside risk because of the interest rate futures curve.
The projection compares with 1.8 percent projected GDP growth for the current year. Santander says the 2027 outlook depends on the financial scenario after the elections. The interest rate futures curve reacted abruptly after the vote, Caruso said.
Debt and spending pressures
Caruso said Brazil’s public debt is estimated at 88 percent of GDP next year, about 20 percentage points above the average for emerging peers. Stabilising debt between 90 and 95 percent of GDP would require a primary surplus of 1.5 to 2 percent of GDP, he said. “You cannot grow for years running with deficits because at some point your credit worsens.”
He said federal spending has historically grown faster than nominal GDP, and that about 90 percent of the federal budget is constitutionally locked by mandatory spending. Revenue-side adjustment has reached a ceiling, Caruso argued, and Congress resists new tax increases.
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Regional comparison
Santander projects 2027 growth of 3.5 percent for Chile, 3.2 percent for Peru, 2.7 percent for Argentina, 2 percent for Colombia and 1.7 percent for Mexico. Chile cut its corporate tax rate to 23 percent from 27 percent. Chilean President José Antonio Kast said the new government had opted for “discipline and fiscal responsibility over excessive indebtedness.”
Source: Santander Brasil
