Brazilian President Luiz Inácio Lula da Silva convened a meeting in Brasília on Thursday with members of his economic team and former collaborators. The discussion centred on the direction of the economy and public debt. The meeting came amid pressure for fiscal adjustment measures, after a negative market reaction to his reelection. The central bank’s Copom committee had kept the Selic rate at 13.75 percent per year the day before, interrupting its rate-cutting cycle. It cited inflation risks and deteriorating expectations.
Debate over fiscal path
Finance Minister Dario Durigan defended a gradual fiscal adjustment built on a review of expenses and of tax benefits. He said the government intends to improve public accounts while preserving its commitments to the population. Durigan also said the proposal by André Lara Resende had deficiencies. He ruled out administrative mechanisms to limit interest rates.
The government has not yet presented a definitive fiscal package for 2027. Lula is preparing a national broadcast address for Sunday.
Rates and debt
Brazil’s gross public debt is close to 83 percent of GDP. Interest spending accumulated to about 9 percent of GDP over 12 months. Lara Resende has proposed a National Fiscal and Monetary Council and a gradual cut in the Selic to 7.5 percent per year. That proposal has drawn criticism from the economic team.
Aloizio Mercadante, president of BNDES, denied that capping the Selic rate is under discussion in the government. The central bank also raised its inflation projections after the depreciation of the real and worsening fiscal expectations.
Related: Brazil holds Selic at 13.75% after Lula's re-election
