Brazil political disputes mark economic policy-making

Significance

The decision terminates the exemption put in place last year by former President Jair Bolsonaro to tackle rising inflation and boost his ultimately failed re-election campaign. The return of fuel taxes is a victory for Finance Minister Fernando Haddad, who sees them as an essential source of revenue to address the difficult economic situation.

Impacts

• A new fiscal rule and a tax reform will be the economic policy priorities for this year.
• Tax reform and the new fiscal rule will both require difficult negotiations with a likely recalcitrant Congress.
• Corporate debt is a potentially serious risk for the Brazilian economy.