澳门六合彩

One of the most important issues in the 2018 elections is Brazil鈥檚 worrisome fiscal condition. At a basic level, Brazil鈥檚 fiscal challenge stems from the government鈥檚 inability to keep expenditures lower than revenue. This is partially due to a problematic pension system. In Brazil, pension expenditures consume a of the budget, which reduces the government鈥檚 capacity to invest in infrastructure, education, health, and other areas in need of funding. According to the Brazilian Senate鈥檚 , although Brazil spent roughly 9 percent of total GDP on pensions in 2017, it was only able to invest 2 percent in the country itself. This disparity is partially the result of generous pension benefits for civil servants; according to the World Bank, the civil service pension system ran a deficit of 1.4 percent of GDP in 2017.

As the Brazilian population ages in the coming years, pension expenses will only increase. Without significant pension reform, Brazil will break its constitutional 鈥溾��, which prohibits increasing federal debt for the sake of financing the government. By 2019, government expenses are the spending cap imposed via a constitutional amendment in 2017. Such fiscal instability could result in a public debt exceeding 100 percent of GDP, thereby Brazil鈥檚 ability to grow and to invest in itself. that failure to resolve the impending pension crisis would not simply limit growth, but would result in a severe economic recession.

In addition to pension reform, important fiscal issues include tax reform and the privatization of state-owned enterprises. Brazil is one of the highest-taxed nations in the world, and ranks 153rd out of 180 countries on the Heritage Foundation . Excessive taxes, along with onerous regulations and over-saturated bureaucratic processes, limit business growth in Brazil, as demonstrated by the nation鈥檚 in the World Bank鈥檚 鈥淒oing Business鈥� project. In addition, in a time of growing deficits, several candidates are the possibility of privatizing state-owned enterprises such as the Bank of Brazil and the government鈥檚 controlling stake in Petrobras. However, polls show that oppose privatization.

Given the high stakes of Brazil鈥檚 fiscal situation, and the diversity of opinions regarding potential solutions, the upcoming elections have significant implications for Brazil鈥檚 economic future. Nonetheless, whether Brazilian voters will take fiscal issues into consideration as they head to the polls in October remains to be seen.

Related Content

The Case for Pension Reform in Brazil: An Unequal and Exhausted Retirement System on the Verge of Collapse

Pension Reform in Brazil

Click here to return to Understanding the Issues.