Brazil's Senate backs bill to write off $2.5 billion in micro-entrepreneur debt

what happened

Brazil's Senate on Thursday approved a bill that would forgive about 12.6 billion reais ($2.47 billion) of debt that small business owners owe the government. The vote is another legislative win for President Luiz Inacio Lula da Silva before the presidential election runoff later this month.

The government unveiled the bill on Tuesday, saying the relief would reach some 3.6 million micro-entrepreneurs. The lower house had already approved the measure on Wednesday. Micro-entrepreneurs, known as MEIs, form a simplified business category the government created to formalize self-employed workers such as food delivery and rideshare drivers, along with small business owners.

The Senate vote comes less than two weeks before the October 25 runoff. Lula trails right-wing Senator Flavio Bolsonaro in polls. On Wednesday, the Senate also approved a constitutional amendment to cut the workweek from six days to five.

For markets, the key points are the fiscal cost of the write-off and the political backdrop, as the decision lands shortly before a vote in which the incumbent is behind in polling. At the time of reporting, $1 equaled 5.0912 reais.

why it matters

Markets will weigh the fiscal cost of the debt relief against the electoral calendar, since a close runoff can shift expectations for public spending and policy. The timing also means the bill's passage is a near-term political signal rather than a settled economic outcome.

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