Brazil’s newly unveiled fiscal plan has drawn sharp criticism from investors, leading to widespread market turbulence. The Brazilian real fell to a record low of BRL6 against the dollar, while long-term government bonds saw significant declines, and future interest rates surged to 14%.
The plan, announced by Finance Minister Fernando Haddad, aims to save BRL70 billion over two years and includes a tax reform that exempts middle-income earners from income tax while increasing taxes on higher earners.
However, economists criticized the measures as insufficient to address Brazil’s growing fiscal challenges, describing them as “modest” and lacking firm spending cuts.
Concerns about fiscal risks have grown as Brazil’s primary deficit reached 1.95% of GDP in October. Haddad sought to reassure markets by expressing a willingness to revise the plan in consultation with Congress and President Lula.
The developments come as Brazil grapples with deteriorating financial conditions and aims to restore investor confidence.