Chamber Speaker Motta Warns Brazil Faces Ungovernability

Brazil faces a fiscal crossroads as Hugo Motta, Speaker of the Chamber of Deputies, warns the nation is heading toward ungovernability.

Motta’s statement, made during a business conference and confirmed by official sources, reflects mounting anxiety over Brazil’s public finances and the government’s response.

The International Monetary Fund projects Brazil’s gross public debt will reach 92% of GDP in 2025 and approach 100% by 2029. This debt level stands well above the average for emerging markets.

The IMF also estimates Brazil’s nominal deficit will hit 8.5% of GDP in 2025, driven by high interest rates and slow growth. The government’s own budget, approved after lengthy negotiations, aims for a modest primary surplus of R$14.5 billion, but this target remains fragile.

Motta criticizes the government’s strategy of plugging budget gaps with tax hikes, such as the proposed increase in the IOF tax on financial transactions.

He calls this approach “unfortunate” and points out that Congress, reflecting broad political consensus, stands ready to reject further tax increases.

Instead, Motta and other key figures urge a shift toward reducing government spending and cutting costly tax exemptions, especially for corporations.

Business leaders echo these concerns, warning that persistent deficits and rising debt have already rattled investors. In recent months, financial markets responded to fiscal uncertainty by selling off Brazilian assets, which drove the real to historic lows.

The Central Bank has kept interest rates high, currently around 15%, to contain inflation and stabilize the currency, but this further strains government finances.

Brazil’s fiscal framework, introduced to stabilize debt, relies on strict targets for deficits and spending. However, official analyses show that without deeper reforms, these targets will be hard to meet.

The government faces pressure to rationalize expenditures, broaden the tax base, and improve fiscal rules. Motta emphasizes that Brazil’s model—high spending and limited returns—cannot continue without risking deeper instability.

The stakes are clear. If Brazil fails to control spending and restore investor confidence, the country could face higher borrowing costs, weaker growth, and reduced public services.

Motta’s warning highlights the urgency for structural reforms to ensure stability and avoid a crisis that would affect every sector of the economy.