Brazil’s Local Governments Face 75% Fiscal Decline in 2023

In 2023, Brazil’s local governments experienced a significant 75.3% reduction in their financial surplus from January to November. That is a big drop in their economic health.

In 2022, they had a surplus of R$ 83.5 billion ($17.22 billion). But in 2023, it was only R$ 20.6 billion ($4.25 billion).

Both years still had more money coming in than going out, not counting debt interest.

The federal government’s situation changed a lot, too. It went from a R$ 48.8 billion surplus in 2022 ($10.06 billion) to a R$ 137 billion deficit in 2023 ($28.25 billion).

The difference is even bigger when adding up the Union, states, cities, and state companies.

Between the two years, a negative shift was R$ 257.4 billion ($53.05 billion).

Bahia was the only state to improve its rating in the credit market. It went from B to A. This rating helps decide if states can get loans with federal help.

But in 2023, six states’ ratings got worse, among them Rio. This change means they might not get federal-backed loans.

Public sector jobs also went up. The Union, states, and municipalities hired about 403,000 more people over the year.

This information comes from the Brazilian stats agency IBGE. With mayoral elections coming in 2024, governments might spend more.

President Luiz Inácio Lula da Silva doesn’t want to cut investments. He aims to strengthen his party’s position in cities.

However, this plan could make it hard to reach the goal of R$ 168.5 billion ($34.74 billion) in extra revenue. This money is needed to balance the budget this year.

Background

Brazil’s financial health contrasts with some of its South American neighbors. Countries like Chile and Colombia have shown more stability in their fiscal policies.

This difference highlights the varied economic paths within the region.

Internationally, Brazil’s fiscal decline is significant when compared to developed economies.

Despite their challenges, countries like Germany and the United States have maintained more robust fiscal positions.

This comparison underscores the varying impacts of global economic trends on different economies.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error