Flavio Bolsonaro pledges budget adjustment without cutting social spending

what happened

Senator Flavio Bolsonaro said on Friday that, if elected, he would try to restrain Brazil's rising public debt without touching social spending commitments. He rejected media reports that his campaign was weighing cuts to social outlays and an end to automatic benefit adjustments.

He said a 200 billion real ($39.49 billion) budget adjustment would come from eliminating ministries, tackling mismanagement at state-controlled companies and monetizing federal real estate. He made the remarks in an interview with Jornal Nacional on TV Globo. The runoff is on October 25, against incumbent Luiz Inacio Lula da Silva, who currently trails in polls.

The senator also said he would not reverse a constitutional amendment approved on Wednesday that shortens the working week from six days to five. Brazil's gross debt has risen more than 10 percentage points under Lula, to 82.9% of GDP.

why it matters

For markets, the key signal is the candidate's willingness to pair fiscal discipline with social spending. Long-term interest rates have fallen since the first round, suggesting part of the expected policy is already priced in. Uncertainty over the budget remains a factor for the real and Brazilian government bonds.

market impact

Real and Brazilian bonds: fiscal pledges shift the risk premium ahead of the runoff

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