Flavio Bolsonaro pledges public debt ceiling if elected Brazil's president

A senior economic adviser to Senator Flavio Bolsonaro's campaign said the candidate would establish a public debt ceiling if he wins Brazil's presidential election in October.

Adolfo Sachsida, a lawyer and economist who joined Bolsonaro's economic team last week, said in a social media post on Wednesday that the measure would help improve Brazil's fiscal credibility and curb spending.

"We will pass a public debt ceiling. If debt gets too high, a spending limit will be triggered, putting the fiscal trajectory on a sustainable path," Sachsida said in a video shared on X.

Senator Bolsonaro, son of far-right former President Jair Bolsonaro, is the main challenger to left-wing President Luiz Inacio Lula da Silva in this year's presidential race.

A Nexus poll published this week shows Lula and Bolsonaro are nearly tied.

If the two go to a runoff, the poll shows Lula would narrowly win with 46% against 45% for Bolsonaro. Other polls show Lula with a small edge over his rival.

The economy is expected to be a key issue in the race. While inflation has slowed and unemployment has fallen to record lows in recent months, Bolsonaro's campaign has warned that another Lula victory would lead to recession.

While conservatives push public debt ceilings as a means of promoting fiscal discipline, critics point out that they restrict government spending during crises. Conservatives often support such limits as a path to cutting government social programs.

Brazil's public debt stands at about 82% of gross domestic product (GDP), up more than 10% since Lula returned to power in 2023.

Last week, Bolsonaro added new economic advisers to his campaign team, including Sachsida, who was appointed mines and energy minister in 2022 under his father Jair Bolsonaro.

In a Substack post before joining Bolsonaro's campaign, Sachsida said a public debt ceiling could be "similar to the ceiling applied in Brazil in the recent past," with automatic cuts occurring whenever gross public debt exceeds 65% of GDP.

In 2016, under market-friendly President Michel Temer, Brazil's legislature approved a constitutional amendment to allow a spending cap. That measure limited federal spending growth to the previous year's inflation rate, essentially preventing the government from expanding its budget.

That rule was weakened several times before being replaced by a new fiscal framework implemented by Lula in 2023, combining primary budget balance targets with real spending growth of 0.6% to 2.5% per year.

Lula, a former union leader, has used his time in office to implement significant poverty-reduction programs, including through investment in social welfare programs. His reelection campaign has pointed to successes under his administration, including the rise in value of Brazil's currency and lower unemployment.

But with relatively high interest rates, Lula's economic platform has become a target of criticism from the right.

Like many recent elections in Latin America, Brazil's presidential race is also being held under the shadow of potential interference from United States President Donald Trump, who has previously used threats and economic leverage to promote his preferred candidates.

Trump is said to be close to Bolsonaro's campaign. But it remains unclear how Trump's tariffs on Brazil could shape public opinion during the election season.

For example, last year, Trump imposed heavy tariffs on some Brazilian exports as a means of pressuring the country to end the prosecution of Jair Bolsonaro.

Bolsonaro senior is accused of leading a coup plot after losing his reelection bid to Lula in 2022. He is currently serving a 27-year prison sentence. In December, he endorsed his son Flavio Bolsonaro to represent the right-wing Liberal Party in this year's presidential race.