Brazil's government has set aside R$ 97.9 billion for six subsidized credit lines in 2027, according to the budget bill sent to Congress on Monday (Aug. 31). In practice, that is money for loans at rates below what banks charge, from the cheapest credit available to targeted groups. The taxpayer picks up the difference in the end: if the funds are fully lent out, the cost can reach R$ 20.5 billion, paid through a larger public debt over the life of the contracts, according to Folha de S.Paulo.
To grasp the scale, that is more than twice the R$ 44.8 billion reserved for congressional amendments, the local projects lawmakers choose, in the same proposal. On average, each real lent carries about 20 cents of subsidy over the life of the contract. The subsidized lines grew during President Luiz Inácio Lula da Silva's third term and became a showcase of his administration; in an election year they reached new groups, such as cars for taxi and ride-hailing drivers and motorcycles for delivery workers.
How it works: the cost comes from what is known as the implicit subsidy, the gap between the rate the Treasury pays to borrow in the market and the lower rate it receives when lending the money to the programs. The calculation entered the PLOA, Brazil's annual budget bill, through a first-of-its-kind annex created after criticism from experts and the TCU, the federal audit court, over the lack of transparency around such spending.
At the presentation of the proposal, Planning Minister Bruno Moretti explained the mechanism:
"When you lend that money at a rate below the one at which others finance themselves, that creates an implicit subsidy. We are showing the impact across the main areas with financial spending, and the implicit subsidy projected for each of them."
A cost outside the fiscal target
Experts criticize the model as a way around Brazil's fiscal rules: because the transfers count as financial expenses, they enter neither the spending limit of the fiscal framework nor the primary result, the balance between government revenue and spending excluding interest payments. The R$ 20.5 billion equals almost 12 million monthly minimum wages; the same budget sets the 2027 floor at R$ 1,741.
The proposal also projects a primary surplus of R$ 18.6 billion for 2027, according to InfoMoney. Since the implicit subsidy sits outside that measure, its cost shows up only in public debt. The bill now goes to Congress, which can change the figures before passing the budget law.