Brazil’s government has started to flesh out plans for a fiscal squeeze, but further measures are likely to be needed if it is to meet its budget targets for this year. According to plans published earlier this month, the government will freeze just under R$70bn in this year’s budget. Around half of the savings will come from health, education and local government, with the rest spread between several areas, including defense, transport and agriculture. In addition to the budget freeze, the government also outlined plans to increase the profit tax on banks, brokerages and credit card companies. All told, we estimate this amounts to a fiscal squeeze of around 1.2% of GDP.
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