Brazil will have to boost spending to fight poverty

 Brazil’s next president will have to temporarily increase public spending to fight poverty and unemployment, according to a close economic adviser to Luiz Inacio Lula da Silva, who leads opinion polls ahead of the October vote.

Nelson Barbosa, a former finance minister during the administration of Dilma Rousseff, a Lula ally, said financial markets have already realised that the current rule limiting the growth of public expenditures to the inflation rate “is unfeasible.” 

The so-called spending cap was created without effective mechanisms that would allow the government to comply with it, and needs to be replaced as part of a wider overhaul of Brazil’s budget laws, he said.

“Poverty has increased, so it will probably be necessary in the short term to increase cash transfers” to the poor, he said in video interview from home, where he recovered from Covid-19. 

“For this fiscal expansion to be compatible with the stability of the economy, it has to come within a broader fiscal framework and as part of a strategy that may increase public debt in the short term, but stabilise it later on.”

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