Brazil political disputes mark economic policy-making
Wednesday, March 1, 2023
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.