R$ 22.7 billion a year. That is the extra cost the new Bolsa Família increase imposes on Brazil's public finances from 2027 onward, and the number worrying economists consulted on Thursday (17). For the 19.3 million families covered by the flagship cash-transfer program, the effect is immediate: the minimum payment rises from R$ 600 to R$ 691 in October, an extra R$ 91 a month, about R$ 3 a day, roughly $134 at current exchange rates. President Luiz Inácio Lula da Silva announced the raise 17 days before the first round of the presidential election on October 4.
None of the experts interviewed by news site g1 disputes the size of the increase, about 15%: inflation has totaled 17% since the program was relaunched in March 2023, so today's R$ 600 buys less than it did back then. Their target is the calendar. "The problem is that this is being done on the eve of the elections, so it is hard not to read the move as electioneering," said André Galhardo, chief economist at Análise Econômica.
The government rejects the electoral reading. "I believe it does not [have anything to do with the elections]. It was clear this came from the registration effort," said Planning Minister Bruno Moretti. Skepticism runs deeper in the market: José Márcio Camargo, chief economist at Genial Investimentos, told Folha he doubts Finance Minister Dario Durigan's assurance that the measure will not affect the budget.
The cost for public finances
This year the bill is smaller, R$ 5.8 billion, because the new value only runs from October to December. From 2027 on, the annual extra spending is R$ 22.7 billion, nearly four times this year's cost, and total program spending climbs from R$ 157.1 billion to R$ 179 billion in the 2027 budget, up 13.9%, according to the Planning Ministry. "In a scenario where we already have a significant fiscal problem, this raise ends up contributing to the problem," said Juliana Inhasz, a professor at the Insper school of economics in São Paulo.
In plain terms: "fiscal risk" is investors' fear that the government will spend more than it collects and borrow to cover the gap. When that fear grows, investors charge higher rates to lend to the country, public debt gets more expensive and credit for families and companies tends to get pricier, slowing consumption and investment. Inhasz also warns that more money in poor households' pockets could push inflation up, against the grain of the central bank, which this week cut its benchmark rate to 13.75% a year.
Economists disagree on how serious the damage is. Consultancy Warren backs the raise: "This is not a new benefit, it is offsetting a nominal loss. The rest is fantasy or ignorance," chief economist Felipe Salto told Folha. Yet Warren's own report says meeting the 2027 target of a primary surplus of at least R$ 36.6 billion, the budget balance before interest payments, will be "quite challenging" with the raise's R$ 23.2 billion annual impact, nearly two-thirds of the target.
The 2022 precedent
The program had not been adjusted since 2022, when it was still called Auxílio Brasil and the script looked similar. Two months before that year's first round, Congress passed Constitutional Amendment 123, the "Kamikaze amendment", which freed spending outside the cap and let Jair Bolsonaro's government raise the floor from R$ 400 to R$ 600. In one month, the average payment jumped from R$ 408 to R$ 607, an increase of almost 50%, and enrollment grew from 18.1 million to 20.2 million families, according to the social development ministry.
Back then it was Lula's own campaign that took the raise to the electoral court, seeking Bolsonaro's disqualification on the grounds that he "granted illegal financial benefits to Brazilian citizens" during the campaign, as Folha reported. "This shows a deterioration of Brazilian institutions, with decisions that should be technical and automatic becoming electoral calendar tools," said José Luis Oreiro, an economics professor at the University of Brasília. For Daniel Duque, a researcher at the FGV institute Ibre, the benefit has nearly tripled since 2021, and recipients are not worse off today than they were then.
Financial markets took the news calmly: the real strengthened 0.24% to R$ 5.1386 per dollar and the São Paulo stock index rose 0.24%, as investors weighed the fiscal impact alongside the central bank's rate cut. The new floor starts being paid on October 19, less than a week before a possible runoff on October 25. Allies of Senator Flávio Bolsonaro, Lula's main rival in the polls, have already said they will challenge the raise before the electoral court.