Brazilian Senate Approves Government's Fiscal Adjustment Project Aiming for R$ 60 Billion Savings by 2027

On November 12, 2026, the Brazilian Senate approved the government's fiscal adjustment project (PLP 299/2026) with a vote of 45 in favor and 31 against. The proposal, highlighted by Senator Eduardo Braga of MDB-AM who presented a substitute version at the government’s request, seeks to reduce public spending and increase revenues, targeting savings estimated between R$ 50 billion and R$ 60 billion by 2027.

Key measures include a linear 10% cut in tax benefits, with exceptions for sectors such as payroll, information technology, semiconductors, and vehicles for persons with disabilities or autism. This act could lead to a reduction of up to 20% in tax benefits when combined with cuts previously approved for 2025. The project also reduces the spending growth ceiling from 2.5% to 2% above inflation during fiscal containment periods, aiming to impose tighter fiscal discipline.

In addition, the proposal removes extraordinary oil export revenues from the calculation of the federal health funding floor until 2030. It sets a deadline of 120 days for Congress to regulate salaries above the public servant ceiling of R$ 46,300. Among fiscal flexibilities, it authorizes excluding up to R$ 10.5 billion related to diesel price subsidy expenses from the 2026 fiscal target, addressing the impact of the Middle East conflict on fuel prices.

Senator Eduardo Braga emphasized the importance of responsible fiscal management, stating, "We want a country that can grow while reducing inequalities." The project includes acceptance of 21 amendments out of 74 proposed, affecting areas such as the District Federal Fund exemption from certain spending restrictions and protection of multi-year contracts until the end of 2027.

The fiscal package also proposes reducing payments to states and municipalities under the Law Kandir between 2027 and 2030 from R$ 4 billion annually to R$ 1 billion. It allows the government to increase contingencies and block expenditures to meet the primary surplus target set at 0.5% of GDP in 2027, roughly R$ 73.2 billion. Notably, the project does not cover structural changes to constitutionally guaranteed mandatory spending such as pensions amid concerns over Brazil’s public debt, currently estimated at R$ 11.1 trillion (approximately 83% of GDP).

Opposition criticism was voiced, including Senator Rogério Marinho labeling the proposal as a disguised tax increase and contesting the expedited parliamentary process, though the urgency request passed narrowly. Overall, the government's fiscal adjustment project underscores an effort to strengthen Brazil’s fiscal stance while accommodating extraordinary fiscal pressures on energy prices in the near term. The project awaits further voting on remaining points in the Senate before moving on to the Chamber of Deputies.