Fast and furious

BRAZIL ECONOMICS - Report 23 Jun 2025 by Alexandre Schwartsman, Cristina Pinotti and Diego Brandao

“In economics, things take longer to happen than you think they will, and then they happen faster than you thought they could.” — Rudiger Dornbusch

In 1992, when asked what the campaign strategy for then-candidate Bill Clinton would be, advisor James Carville famously replied: “It’s the economy, stupid!” There’s no need for expletives in our case, but if someone were to ask what Brazil’s central problem is today, the answer would be just as straightforward: “It’s the fiscal!”

That’s not an exaggeration. Of course, there are other issues—both macro and micro—affecting the Brazilian economy. However, the fiscal question has taken center stage because problems once thought to be several years away have come knocking much earlier than expected.

There are two key knots in this issue. The first concerns the evolution of government debt. Gross debt, measured using criteria similar to those adopted by the IMF—thus comparable across economies—reached 88.8% of GDP in April, the highest level since February 2022 and nearly 5 percentage points above the level recorded in December of that year (under the local definition, debt reached 76.2% of GDP, 4.5 percentage points higher than in December 2022).

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