Key facts
- The package includes curbs on tax breaks and new tools to restrain spending growth, Moretti said.
- Savings of up to 60 billion reais equal 0.5% of gross domestic product, Moretti said.
- Armando Armenta of AllianceBernstein said the adjustment Brazil needs is larger than the 2027 proposal.
- Maria Carolina Luchesi of Hike Capital said markets need measures that permanently reduce spending growth.
- Two sources close to government-allied lawmakers said sending the proposal now made sense before the next Congress starts in February.
- Lula is expected to choose his next finance minister on his return to Brazil the week after November 12, 2026.
Brazil's government sent a package of public spending measures to the Senate on Wednesday, November 11, 2026, designed mainly to keep it on track to meet its fiscal targets rather than go beyond them. A Senate vote on the plan was expected later on Thursday, November 12, 2026.
The measures, including curbs on tax breaks and new tools to restrain growth in spending, would save the public finances up to 60 billion reais ($10.75 billion) in 2027, Planning Minister Bruno Moretti said. That equals 0.5% of gross domestic product, a small tightening although savings are set to grow in future years. Moretti played down the prospect of any immediate push for bigger fiscal reforms on Wednesday.
Some market analysts said further action will be needed. "The adjustment Brazil needs is larger than this 2027 proposal, so I think it falls short on helping to decrease medium-term concerns," Armando Armenta, senior economist and strategist at AllianceBernstein, said. Maria Carolina Luchesi, investment specialist at Hike Capital, said: "The market will need to see measures that reduce permanently the growth in spending and real progress on reform in Congress."
Brazil's real currency on Thursday, November 12, 2026, was trading at its weakest level against the US dollar since mid-2025. Two sources close to government-allied lawmakers said sending the fiscal proposal to lawmakers now made sense ahead of the start of the next Congress in February, which will be dominated by opposition parties. "That window of opportunity is there, provided there is a well-executed effort to build political support," one of the sources told Reuters.
How much further Lula is willing to go remains unclear. He is expected to choose his next finance minister on his return to Brazil the week after November 12, 2026, from international trips, potentially offering a clearer sign of his economic policy direction.
With Brazil's public finances out of balance, there is little prospect of a sharp fall in official interest rates, which are among the highest in the world for a developing economy. The central bank held its benchmark rate at 13.75% in the week before November 12, 2026, ending a run of cuts. The government points to its plan for a modest primary surplus in 2027 after three years of small deficits, but investors remain concerned about the overall budget deficit of nearly 10% of GDP, driven largely by debt costs.
Some members of Lula's Workers' Party say Brazil's problem is its high official interest rates. Lindbergh Farias, a Workers' Party representative in the lower house of Congress, criticized Wednesday's package and proposed spending cuts. "I took part in the entire electoral campaign and no one talked about a fiscal adjustment," he said. "It was about (social) rights and the widening of those rights."
On Sunday, November 8, 2026, in his first official address to the nation after winning the election, Lula suggested he would try to bring down rates by tackling the public finance problem. William Jackson, chief emerging markets economist at Capital Economics, said three of the last four cycles of interest rate cuts in Brazil came shortly after major fiscal reforms had passed big congressional hurdles. "This evidence would suggest that Lula needs to provide something far more tangible, such as more ambitious targets or a new fiscal rule, if he's going to get his wish for lower interest rates any time soon," Jackson said.