Brazil’s Ruling Party Backs Lula Budget Plan

Brazil's Workers' Party, the political party led by President Luiz Inácio Lula da Silva, supported his budget plan on November 13, 2026. Party leader Edinho Silva stated in Brasília that the measures target tax breaks and privileges rather than health, education or welfare. The vote carries significance for US investors as the package aims to stabilize Brazil's public finances; a successful plan might allow the central bank to cut interest rates, affecting Brazilian bonds and the real currency.

The bill, numbered PLP 299/2026, passed the Senate's main vote on November 12 with 45 votes to 31. The government estimates the plan will improve Brazil's primary budget balance (revenue minus spending before interest) by R$45.1 billion to R$56.1 billion in 2027, equivalent to US$8.0 billion to US$9.9 billion at the official PTAX exchange rate of R$5.65 per US$1.

The plan cuts many exemptions, tax credits and special tax regimes, except for information technology, semiconductors and car purchases by disabled people. If there are containment measures triggered by the government, real spending growth from 2027 is capped at 2% instead of 2.5%. The bill also allows the federal government to delay part of the Lei Kandir payments, reducing them from R$4 billion to R$1 billion annually from 2027 to 2030.

Party President Edinho Silva emphasized that the plan does not involve cuts to health or education. The central bank maintained its key rate, the Selic, at 13.75% at its last meeting on November 4. Economists surveyed by the central bank anticipate a growth rate of 1.15% for 2027, slightly lower than the 1.75% expected for 2026.

The Senate will vote on four remaining amendments on November 17, after which the bill will proceed to the Chamber of Deputies.