Brazil's VP sees room to cut spending, boost growth to ease debt

Brazil's Vice President Geraldo Alckmin said on Monday that the country can simultaneously restrain public spending and accelerate economic growth, arguing that such a combination would help bring down the debt-to-GDP ratio.

"By improving the spending side and fostering economic growth, you improve the debt-to-GDP ratio," Alckmin said at an event hosted by BTG Pactual. He added that the government expects to deliver gradually higher primary surpluses in the coming years.

His remarks came after central bank data showed Brazil's gross public debt rose again in July to 82.5% of gross domestic product. The ratio has climbed by more than 10 percentage points during President Luiz Inacio Lula da Silva's current term. Many economists argue that the government's failure to present a credible path to debt stabilization remains one of its biggest vulnerabilities as mandatory spending continues to rise.

Investors have also voiced concern over Brazil's rapidly growing interest bill, which has pushed debt levels higher despite improvements in the primary fiscal balance.

Alckmin, who will again be Lula's running mate in the October election, acknowledged the need for lower interest rates, noting that the benchmark Selic rate, currently at a lofty 14%, represents a "major problem."

Ahead of a scheduled meeting between Brazil's Industry and Trade Minister Marcio Rosa and U.S. Trade Representative Jamieson Greer, Alckmin said there were opportunities to advance the bilateral agenda. He cited as an example a measure expected to come to a vote this week aimed at encouraging data center investments in Brazil.

Alckmin said Lula's government wants to deepen discussions with the U.S. on both tariff and non-tariff barriers, stressing that Brazil has no intention of stepping away from negotiations.