Brazil's Lula Team Plans to Submit Fiscal Proposal to Calm Markets

Brazilian President Lula's economic team plans to submit a proposal to Congress before next week, outlining how the government intends to achieve its fiscal targets over the coming years. Officials are discussing spending limit measures with lawmakers, with an expected adjustment scale of between 50 billion and 60 billion reais (approximately 10.7 billion USD) by 2027. These measures aim to provide the government with greater flexibility to address risks to fiscal targets by freezing expenditures. The proposal also includes provisions to prevent unexpected revenue from automatically increasing constitutionally mandated minimum spending on health and education, a mechanism that has been applied in years when the government faced primary deficits, and officials are considering extending it to surplus years.