Brazil's public debt reached R$ 11.1 trillion in August, the highest level since the pandemic, according to the Central Bank. Spread across the country's roughly 212 million people, the bill comes to about R$ 52,000 per Brazilian. That is the inheritance awaiting Lula (PT) or Flávio Bolsonaro (PL), whichever one wins this Sunday's (25) presidential runoff and takes office on January 5, 2027.
According to a joint analysis by G1 and BBC News Brasil, the economy will be the next government's Achilles' heel. On top of unbalanced public accounts, the winner will face voters angry about the cost of living, record household debt and slower economic growth expected in 2027.
Understand it: the debt grows when the government spends more than it collects in taxes and has to borrow at ever higher interest rates, a fiscal snowball. With debt at 82.9% of GDP (gross domestic product, the sum of all goods and services produced in the country), the Central Bank says it has little room to cut the benchmark interest rate. In practice, that means more expensive credit for anyone financing a car, a home or carrying a credit card balance.
What Flávio Bolsonaro proposes
The senator, son of former president Jair Bolsonaro, talks about taking a "big scissors" to public spending and taxes. His economic aides have promised, in interviews and behind the scenes, a fiscal adjustment (spending cuts or revenue increases to balance the books) of 1.5% to 2% of GDP in the first 18 months. In practice, that would mean spending cuts of R$ 190 billion to R$ 250 billion.
At the same time, Flávio promises to keep the real increase in the minimum wage, to maintain the link between pensions and social benefits and the wage floor, and to preserve the constitutional minimum spending on health and education. The cuts would focus on ministries, political appointees, administrative expenses and public sector "super salaries", plus fighting corruption. For Felipe Salto, chief economist at Warren Investimentos, "the math does not add up", because it would not be possible to cut the tax burden and keep those promises at the same time.
What Lula proposes
The president's electoral package created expenses with an impact of nearly R$ 200 billion through 2030, according to a Warren Investimentos estimate made before his proposal for free public transport on weekends. The total equals roughly R$ 940 per Brazilian. Lula keeps saying that economic growth and the resulting increase in tax revenue are the way to reduce the debt, without committing to spending cuts.
Among the promises that raise spending or reduce revenue are Desenrola 3.0 (a household debt renegotiation program), debt forgiveness, a R$ 5,000 Pix payment, a higher revenue ceiling for individual microentrepreneurs (MEI), a ban on online betting, a larger Bolsa Família cash transfer and the extension of fuel tax breaks. "We do not have well-defined proposals from either candidate. This debate was left for after the election, because every proposal involves cutting spending, something that is obviously unpopular", says Rafaela Vitória, chief economist at Banco Inter.
What economists say
In Rafaela's view, Flávio would get more patience from financial markets at the start of his term, given the record of Jair Bolsonaro's government, which raised the minimum wage only by inflation and kept the spending cap created under Michel Temer (MDB). Lula, in her assessment, has a credibility problem after four years without controlling spending, made worse by his campaign promises.
Salto argues that the winner must present a clear plan for public accounts "in the first hour", something missing from the campaign debate. For Bruno Imaizumi, an economist at consultancy 4intelligence, "a successful government will not be the one that posts the best numbers over these four years, but the one that leaves an economy in better condition to grow in the following years".