Marcos Lisboa argues that Brazil does not have to choose between protecting social programs and balancing its public accounts. In his view, the country’s fiscal problems are driven by rules that automatically increase public spending, along with benefits and subsidies for specific groups, rather than by social programs as such.
Lisboa points to mounting economic pressures, including a record number of companies in judicial recovery, high private-sector debt and difficulties in parts of the retail and agribusiness sectors. He says public-account imbalances and high interest rates are contributing to these strains, which could worsen in 2027 depending on decisions made during the transition to the next term.
He argues that many public expenses cannot simply be cut because of constitutional protections. The government cannot, for example, dismiss public servants, reduce their salaries or pensions, or cut transfers to states and municipalities. Nor, he says, can fiscal adjustment be built on reductions to health, education or social security spending.
Instead, Lisboa identifies the recurring growth of mandatory expenditure as the central fiscal problem. He notes that health and education spending is linked to government revenue, while a substantial share of social security spending is tied to the minimum wage, which rises with inflation and real GDP growth. In his account, these rules squeeze discretionary spending as mandatory costs grow, while successive exceptions have allowed spending to expand outside the fiscal framework.
Lisboa says the government’s debt-to-GDP ratio has risen by more than ten percentage points during its term. He argues that restraining the growth of social spending, rather than cutting it, could ease pressure on public accounts. His proposed changes include removing the links that make health, education and social security expenditure rise automatically with revenue or other indicators.
He also calls for a review of tax distortions, financial assistance and subsidies, acknowledging that reform would be difficult because beneficiaries defend those measures. He says successful changes would require political leadership and sustained negotiations.
Lisboa links fiscal strain to a broader failure to design, assess and improve public policies. He cites housing programs, debt-relief initiatives, education spending, shipbuilding efforts and support for the Manaus Free Trade Zone as examples where repeated measures, in his view, have not produced the intended results, yet have been expanded rather than reassessed.
The economist also cautions against proposals to raise Brazil’s inflation target as a quick way to reduce interest rates. He says the risk is that higher inflation expectations could push interest rates up. He calls for careful analysis of past experience and research before changing monetary policy.
Lisboa concludes that the proposed economic agenda would require broad political support, public debate and negotiations, including changes to the Constitution. He argues that building a government capable of delivering effective public services while safeguarding its finances is ultimately a task for the presidency.
Sources: Folha Mercado.