A persistently expansionary fiscal stance, a tighter output gap, and, above all, a monetary policy framework characterized by lower credibility help explain why 10-year inflation expectations have risen more sharply and remained more persistent in Brazil than in the United States.
The arithmetic is straightforward. The politics are not. The adjustment required to stabilize public debt is substantial. The most frequently discussed proposals in Brazil's fiscal debate are well known and have been debated by governments across the political spectrum, underscoring the difficulty of translating technical solutions into political reality.
The promise of a more meaningful reduction in public-sector financing needs through spending cuts remained largely unfulfilled. The primary deficit (excluding interest payments) declined from 3.2% of GDP at the end of the Biden administration to 2.7% in 2025 and likely 2.5% in 2026, but this does not appear sufficient to alter the trajectory of the overall fiscal deficit. Moreover, the adjustment has been driven more by higher revenues than by lower spending.
by Tatiana Pinheiro.
The May IPCA report suggests that the disinflation process observed in the second half of 2025 has come to an end. Inflation rose by 0.58% month-over-month and 4.72% year-over-year.
In the following pages, we argue that the current policy mix has significantly intensified wealth inequality in the country, despite its redistributive disguise.
It is misleading to attribute to advocates of fiscal adjustment the intention of cutting public spending. The pace of expenditure growth in recent years has been so accelerated that simply reducing the speed of expansion would already represent a remarkable improvement.
Brazilians are predominantly conservative. Most people tend to uphold traditional values related to religion and family, as well as stereotypical views about gender roles, while showing limited acceptance of minorities (difference is tolerated, but often perceived as uncomfortable in the public sphere). We know that a society’s behaviors and opinions are influenced by how secure people feel about their own survival: the greater the sense of fear, the more individuals tend to rely on discipline imposed by religion and traditional values[1]. Charts 1 and 2 show how Brazilian society has increasingly identified itself as more right-leaning and more conservative over the past decades.
We outline below the key issues likely to dominate the 2026 electoral cycle and assess how each may shape electoral outcomes.
Charts 1 and 2 already provide a clear signal: crime and corruption have increased in salience over the past four years. Healthcare remains relevant, but less so than during the COVID-19 period, when it likely contributed to the defeat of the incumbent.
Democracy, while not explicitly captured in Ipsos and Datafolha surveys, was a decisive issue in 2022 but is unlikely to carry the same weight in 2026.
The economy does not appear to be a particularly sensitive topic at present, as inflation and unemployment are at relatively comfortable levels. ESG and diversity-related issues also show limited traction among voters.
