Brazil increases 2023 spending cap by nearly US$30bn

Brazil’s senate and lower house approved a constitutional amendment to increase the spending cap by 145bn reais (US$27.8bn) next year, when Luiz Inácio Lula da Silva will assume the presidency.

The approval seems a compromise mollifying investors, because earlier this month the senate’s constitution and justice committee had approved the same increase for both 2023 and 2024.

Lula’s transition team requested extra spending of 175bn reais a year above the cap for the four-year government term, which will start January 1.

Current rules limit increases in government spending to the rate of inflation.

The constitutional amendment is aimed at maintaining social programs.

Investors have been anxious to receive signals about Lula’s fiscal policies.

Fernando Haddad and Aloizio Mercadante, who are close to Lula, were recently appointed finance minister and president of development bank BNDES. Investors had preferred economists with more technical backgrounds.