Brazil Government Proposes Moretti Plan for Fiscal Adjustment
New fiscal measures aim to reach primary target through spending cuts and revenue adjustments.
1Overview of Moretti Plan
The Brazilian government introduced the Moretti Plan, a fiscal adjustment project designed to help the economic team reach the primary result target. The proposal, presented by Senator Jaques Wagner, aims to create a contingency floor for public spending. These measures seek to balance the budget by managing revenues and expenditures effectively.
2Fiscal Impact and Goals
Minister Bruno Moretti stated that the actions will have a total impact of R$ 60 billion in 2027. A significant portion, R$ 50 billion, is intended to reduce expenses, while R$ 10 billion will accommodate electoral promises like the Bolsa Família adjustment. The plan creates a cushion to ensure fiscal stability.
3Triggering Expenditure Limits
If the primary result falls below the fiscal target floor, a trigger will be activated to reduce the growth of expenses. This mechanism limits spending growth from 2.5% to 2% above inflation. Once activated, this trigger cannot be reversed, even if tax collection improves, ensuring a strict adherence to the fiscal framework.
4Contingency and Obligatory Spending
The government may now freeze a larger volume of funds to reach the central fiscal target of R$ 8.5 billion. This includes holding back previously immune obligatory expenses. However, constitutional obligations such as social security benefits, health and education floors, and civil servant salaries remain protected from these specific budget cuts.
5Tax Credit Adjustments
To reach the central target, the plan allows the government to limit tax compensations used by taxpayers to offset other taxes. This effectively shares the fiscal adjustment burden between the government and the private sector. Taxpayers will need to pay more in cash rather than relying on credits for their tax obligations.
6Oil Revenue Management
Until 2030, extraordinary revenues from oil sales and export taxes will be excluded from the Net Current Revenue calculation. This strategy prevents the expansion of permanent expenses based on temporary, volatile income. The measure opens space for other expenditures in 2027, though it will subtract from total spending limits starting in 2028.
7Administrative Efficiency Measures
The project mandates a 120-day deadline for Congress to regulate public sector 'super-salaries' and limit extra benefits. The government estimates this could save R$ 3 billion in the coming year. These savings can be redirected toward structural investments or the National Public Security System, allowing for flexible budget management between government branches.
8State and Municipal Transfers
The plan limits annual compensation transfers to states and municipalities related to the Kandir Law, reducing them from R$ 4 billion to R$ 1 billion until 2030. Additionally, social security compensations for local governments are capped at R$ 3 billion annually, significantly lower than the previously projected R$ 8.3 billion for 2027.
9Legislative Outlook and Context
While the government hoped for a swift vote, opposition resistance delayed the discussion in the Senate. The plan represents a complex effort to reconcile fiscal responsibility with social commitments. Its success depends on congressional approval and the government's ability to navigate these structural changes to the national budget through 2030.
Original article: Folha de S.Paulo — Brazil Government Proposes Moretti Plan for Fiscal Adjustment