Brazil's Finance Minister Warns of 'Painful Final Mile' in Fiscal Reforms

Brazil's Finance Minister Dario Durigan said on Monday that the country is entering a "painful final mile" of fiscal reforms, as it grapples with high interest rates, a growing public debt, and household leverage near record levels.

Speaking at an event hosted by Santander Brasil in Sao Paulo, Durigan stressed the urgency of the situation. "We have to deal with it. This needs to be addressed quite quickly so that we can return to having a development project, a country project," he said.

Durigan outlined several areas requiring attention, including curbing mandatory spending and reviewing the size of congressional earmarks — the budget allocations that individual lawmakers direct to projects in their districts. He also called for addressing privileges within the pension system, particularly for military personnel, and for reining in above-cap salaries in the public sector.

"Do we need to do it? We do. Let's bring it into the light of day," he added.

The remarks come amid investor concerns over the lack of a credible path to stabilize Brazil's public debt, which has forced the government to pay hefty risk premiums to finance itself. Since President Luiz Inacio Lula da Silva took office in 2023, the country's gross public debt as a share of GDP has risen by more than 10 percentage points.

Notably, Lula's government platform for the coming years does not detail fiscal adjustment measures to curb mandatory spending, nor does it outline steps to address privileges in the pension system or the public sector, with the exception of the goal to reduce congressional earmarks.