Fiscal Policy Victories and Frustrations

BRAZIL ECONOMICS - Report 09 Oct 2017 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

​The economic team has been unquestionably racking up victories on the fiscal front, among them changes in the design of the student loan program (Fies); alteration of the system of setting the interest rates charged by the BNDES, which will eliminate implicit subsidies; and measures to combat fraud in government benefits. It also took an important step toward altering the public debt dynamic by placing a cap on primary expenditures in real terms. However, this ceiling cannot be sustained without approval of a pension reform that preserves the government’s original proposal. Unfortunately, the political conditions for that approval are absent, and we show here that the scenario until the election of the next government will be marked by deterioration of the fiscal conditions.

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