🦫 Finance Ministry’s Groundhog Day

Business leaders recoil as Brasília muddles its message (again). Quantifying the country’s coffee crisis. How Brazil let online extremism run amok for years

Author

Gustavo Ribeiro
May 23, 2025

LULA VS THE MARKETS

Government botches austerity announcement. Again.

No bright faces as the economic team announces a market-breaking tax hike. Photo: Diogo Zacarias/MF

No bright faces as the economic team announces a market-breaking tax hike. Photo: Diogo Zacarias/MF

Just as the Brazilian government tried to demonstrate fiscal restraint, it torpedoed any goodwill by unveiling a tax hike that sent shockwaves through markets — in an episode that underlines this administration’s incapacity to learn from past mistakes, whether that be with its fiscal policy, its relationship with markets or its internal coordination.

On the same day Brazil’s Finance Ministry announced a budget freeze of BRL 31.3 billion (USD 5.47 billion), the transportation minister blindsided the economic team by letting slip a plan to raise revenue by making it harder for people to send money abroad — and did so, of all places, at an event held at the headquarters of Brazil’s stock exchange.

President Luiz Inácio Lula da Silva later made it official, signing a decree that raised the IOF financial transactions tax with immediate effect on credit and foreign exchange transactions. The move, which the government had dismissed months ago, aims at raising BRL 20.5 billion (about USD 3.58 billion) in 2025 and BRL 41 billion in 2026, and is part of a broader but increasingly erratic effort to balance the books.

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A MESSAGE FROM THE BRAZILIAN REPORT

For decades, Brazil’s political system has been described as one of “coalition presidentialism” — an arrangement in which the president governs by building alliances with multiple parties, often through the strategic distribution of cabinet posts and budgetary incentives. But that model appears to be under increasing strain.

To examine whether this system is collapsing or merely evolving, The Brazilian Report's editor-in-chief, Gustavo Ribeiro, is hosting an unmissable round table with Claudio Couto and Carlos Pereira, two leading political scientists from the Getulio Vargas Foundation.

📅 Wednesday, May 28: 11 am (Brazil time: GMT-3), 10 am EST

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