💰 A new fiscal paradigm

PUBLIC ACCOUNTS

Budget control slipping from Brasília’s hands

For decades, Brazil’s federal government held tight control over the public purse. Today, that grip is loosening. Through a combination of legal reforms, political pressure and fiscal necessity, a growing share of federal funds is being steered by states, municipalities and Congress itself — raising deeper questions about the sustainability of Brazil’s public finances.

According to data from the National Treasury, the amount of federal transfers to states and municipalities increased by 4.4 times between 2008 and 2024 — and this year is on pace to be the highest on record. This trend will deepen with Brazil’s tax reform, which includes a BRL 160 billion (USD 29.1 billion) compensation fund for states through 2032.

At the same time, congressional budgetary grants — funds that lawmakers earmark for local projects — have grown significantly. These grants have risen from BRL 35.6 billion to BRL 50.4 billion under President Luiz Inácio Lula da Silva, becoming a key tool for managing Congress. While often seen as symbols of pork-barrel politics, they also reflect Brazil’s evolving federal balance…

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