Brazil's 2026 Economic Outlook: Fiscal Challenges and Infrastructure Investment Amid Election Year

As Brazil enters 2026, the economic outlook is tempered by significant fiscal challenges and a cautious private sector due to upcoming elections. Marcelo Noronha, president of Bradesco, presented a comprehensive forecast at the World Economic Forum in Davos, highlighting expectations of a slowdown in credit markets and corporate fundraising, projected to fall between 10% and 20% given electoral uncertainties. He emphasized Brazil’s growth rate at an estimated 1.5%, markedly below the global GDP growth of 3.2%, with inflation stabilizing near 3.8% and the Selic interest rate possibly lowering to 12%. Noronha pointed out Brazil’s high public debt, over 80% of GDP, as a major fiscal concern requiring robust management regardless of electoral outcomes. Investment appetite remains modest, restrained by high real interest rates and cautious corporate behavior.

In parallel, infrastructure investment strategies are gaining traction as a key government priority. Brazil is set to conduct 14 federal highway and 8 railway concession auctions this year, anticipated to attract R$ 300 billion in investments over the contract periods. The National Bank for Economic and Social Development (BNDES) is positioned as a pivotal financier, aiming to exceed R$ 22 billion in loans for highways and R$ 3.7 billion for railways this year, supporting long-term infrastructure projects. The auctions, including routes across multiple states and key railway corridors, remain scheduled despite the electoral period, indicating political consensus on maintaining infrastructure momentum.

This infrastructure push is especially crucial given Brazil's current transport conditions; only 32.5% of federal roads are rated as 'excellent,' with nearly 20% categorized as 'poor' or 'very poor.' The engagement of private investment through concessions is seen as protecting public finances and improving road quality, an approach now gaining wider political acceptance, including from the historically privatization-resistant PT party.

These developments reflect a dual approach as Brazil navigates its 2026 economic landscape: tackling fiscal sustainability challenges while leveraging infrastructure concessions to stimulate growth and public utility improvements despite a politically sensitive environment.