Brazil Announces Fiscal Adjustment Package Targeting R$ 60 Billion Savings by 2027 Amid Market Reactions

The Brazilian federal government unveiled a fiscal adjustment package aiming to save between R$ 50 billion and R$ 60 billion by 2027. The announcement, made by Planning and Budget Minister Bruno Moretti during a Congress hearing, outlined measures compiled into a complementary law project to be negotiated with the Senate. The package seeks to control federal spending growth and increase revenue without compromising essential social policies.

Key components include a proposed limit on real federal spending growth to 2% for 2027, potentially yielding an additional R$ 12.8 billion in savings. It also suggests a 10% reduction in tax exemptions and restrictions on corporate tax credits. Moreover, the methodology for calculating the constitutional health spending floor will exclude extraordinary revenues from oil and gas exploitation, extending this temporary rule until 2030.

The government hopes to achieve a primary surplus equivalent to 0.5% of GDP (R$ 73.2 billion) in 2027, aiming to increase this surplus to 1.5% by 2030. Moretti emphasized that these fiscally responsible measures aim to rationalize expenditures while sustaining fundamental rights.

Following the announcement, financial markets responded positively. The Brazilian real strengthened against the dollar, with the USD/BRL exchange rate falling by 0.42% to R$ 5.5628. The Ibovespa index rose 0.42%, closing at 172,060.44 points, reflecting investor optimism about the fiscal plan. However, Petrobras shares declined after reporting third-quarter earnings below market expectations, limiting the index's gains. Oil prices climbed due to geopolitical tensions between the U.S. and Iran, with Brent crude rising 1.39% to $92.76 per barrel.

The fiscal package will be formally presented in the Senate by government leader Jaques Wagner, with expectations for expeditious legislative approval. The government aims to balance public accounts responsibly amidst economic constraints, ensuring the sustainability of core social investments.