The management of social policies in Brazil faces serious problems that compromise the balance of the federal budget, according to an analysis by Gabriel Barros, chief economist at ARX. In an interview with CNN 360°the expert highlighted two main vectors that explain the explosive growth in public expenditure related to social benefits. “There is a lack of control from a management point of view in social policies,” stated Barros.
The first factor pointed out by Barros is the return of indexing. “Every R$1.00 increase in the minimum wage generates an impact of R$400 million on public expenses”, explained the economist. He highlighted that Brazil is one of the few countries in the world that links work wages with benefit wages, creating a cascade effect on public accounts.
The second vector is the lack of control in , especially in the BPC (Continuous Payment Benefit) and in the INSS (National Social Security Institute) benefits. “There are more than 2 million benefits in the INSS being held back. If we put it in the account, this will amount to more than R$70 billion that the government stopped spending due to holding back the payment of benefits”, warned Barros. According to him, social policy in Brazil has grown a lot in size, but management remains inefficient and decentralized, with a lot of overlap in the granting of benefits.
Limits of the fundraising strategy
The economist also criticized the government’s strategy of focusing exclusively on increasing revenue for . “The government has exhausted this revenue increase agenda. There have been many revenue increases promoted since the government took office,” he stated. Barros noted that Congress is already showing signs of fatigue in relation to new measures to increase the tax burden.
Although he recognizes that the volume of tax waivers in Brazil, which exceeds 5% of GDP, is very large when compared to the rest of the world, the expert criticizes the unilateral strategy of fiscal consolidation. “The government was very critical of the last government’s fiscal adjustment strategy, which was more focused on expenditure, but it also adopted a strategy 100% focused on revenue”, he pointed out.
Regarding a possible revision of the fiscal target in 2026, the presidential election year, Barros assesses that the government will try to avoid this measure as much as possible due to the negative repercussions it could have on the exchange rate and the interest curve, with the potential to disrupt electoral plans. However, he notes that the government has already been removing expenses from the spending limit, a move that, according to the economist, compromises the credibility of the fiscal framework.
