Lula Government Plans to Raise Fiscal Adjustment Target to $14 Billion

Brazilian President Lula's government is preparing additional budget measures to improve the fiscal situation for next year and strengthen public finances. The proposal aims to cut expenditures currently excluded from the fiscal targets and limit certain mandatory spending. These proposals, combined with measures already submitted to Congress this week, are expected to raise the fiscal adjustment scale for 2027 to approximately 80 billion reais (about $14.2 billion). The Lula government plans to incorporate these measures into a proposed constitutional amendment and aims to submit them to Congress by the end of the year, complementing the government's plan announced on Wednesday to seek a reduction in spending of 50 to 60 billion reais by 2027. Following this news, the Brazilian real's decline briefly narrowed, and the rise in swap rates eased.

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