ABSTRACT
Brazil’s economic history has been littered with recurrent fiscal crises which, all too often, have required drastic measures to address them. Such crises have contributed to the volatile growth trajectory which has become a defining feature of the Brazilian economy over the past half century and more. Over the years, a number of attempts have been made to tackle the structural drivers of fiscal fragility which lie at the heart of the problem. In the course of this chapter, some of the most important recent such initiatives are examined. While successes were encountered, not least in connection with the Real Plan, reform efforts proved unable to prevent the deep fiscal crisis which overtook Brazil between 2014 and 2016. While emergency measures – including a 20-year real terms spending freeze – subsequently helped strengthen Brazil’s public finances, it remains the case that severe structural challenges remain. In particular, caught between the new spending cap and elevated non-discretionary spending obligations, the scope for discretionary, growth-promoting expenditure is now severely constrained. In the wake of the global COVID-19 pandemic, the situation has become much more challenging still.
