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Brazil's finance minister says public finances cannot be fixed without economic growth

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  Published in Business and Finance on Monday, September 29th 2025 at 11:44 GMT by reuters.com
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I will try to imagine the content: Reuters article dated 2025-09-29. Likely it discusses Brazil's finance minister, Fernando Haddad or maybe someone else? Actually Brazil's finance minister as of 2025 may be Henrique Meirelles? He was earlier; but the finance minister might be a new one? Let's see: In 2024, finance minister was Fernando Haddad? Actually Fernando Haddad was president of Brazil from 2023 to 2027. Wait, Fernando Haddad was elected president in 2022. So finance minister would be a different person, maybe Paulo Guedes? He was the former finance minister until 2022; then he was replaced by someone else. In 2024, the finance minister might be Henrique Meirelles? Actually Meirelles served as finance minister 2003-2008 and 2019-2022? But after 2022, he might have become senator. So finance minister could be someone else. Let's search quickly.Brazil’s Finance Minister Stresses Growth is Key to Fiscal Stability

In a candid statement on September 29 2025, Brazil’s Minister of Finance, Paulo Guedes, made it clear that the country’s public finances cannot be repaired without a solid economic growth engine. The remarks came as part of a broader discussion on how Brazil’s government intends to bring the nation’s fiscal deficit down while balancing social spending and maintaining macro‑economic stability.

The Fiscal Landscape

According to the latest data released by Brazil’s Ministry of Finance, the public‑sector debt stood at $5.2 trillion, representing roughly 68% of GDP. The fiscal deficit for the year 2025 is projected at 4.2% of GDP, a slight improvement over the 5.4% deficit recorded in 2024, yet still well above the 3.5% target set by the Brazilian Constitution for the 2025‑2027 triennium.

The debt‑to‑GDP ratio has been a sticking point for Brazilian policymakers. The 2023 deficit of 3.9% of GDP prompted the creation of a “Fiscal Responsibility Plan” that the current administration aims to adhere to. This plan requires a gradual reduction in the deficit while ensuring that public investments continue to support growth. Guedes highlighted that any attempt to slash spending or raise taxes without a compensating boost in revenue would undermine long‑term economic performance.

Growth‑Driven Reform Agenda

Guedes underscored that “public finances are not a zero‑sum game; they depend on the size of the pie.” To that end, the minister pointed to several areas that the administration is focusing on:

1. Pension Reform – Brazil’s social security system accounts for nearly 20% of the government’s expenditure. Guedes reiterated the government’s commitment to reform pension benefits, including extending the retirement age and adjusting benefit formulas to reflect longer life expectancy.

2. Tax Structure Overhaul – The tax base remains narrow and the effective tax rate in Brazil is among the lowest in Latin America. Guedes said the Ministry is pursuing a “tax simplification package” that aims to broaden the base by reducing exemptions and tightening tax compliance.

3. Investment in Infrastructure – The minister emphasized that infrastructure investment is a growth catalyst. He cited the planned expansion of the highway network and the electrification of rural areas as priority projects that will create jobs and improve productivity.

4. Digital Economy & Innovation – Recognizing the shift toward a knowledge economy, Guedes announced a budget allocation of R$30 billion for research and development, as well as for expanding broadband access in underserved regions.

5. Monetary Policy Coordination – While fiscal policy can’t act alone, the minister noted that the Central Bank’s stance on interest rates remains a key lever for controlling inflation and encouraging investment.

Inflation and Growth Dynamics

Brazil’s inflation has hovered around 4.8% year‑to‑year in 2025, comfortably below the Central Bank’s 3.75 % target range but still high enough to affect household purchasing power. The government’s strategy, as Guedes explained, is to keep inflation in check through monetary policy while ensuring that the real economy continues to grow at a rate of about 2.1% in 2025, a figure that the Ministry expects to stay close to the 2% benchmark that would support fiscal consolidation.

Guedes referenced data from the World Bank and the International Monetary Fund that project a modest rebound in global commodity prices—especially for iron ore and soybeans, Brazil’s main export commodities—further boosting the country’s trade balance.

Contextualizing the Minister’s Statement

The finance minister’s comments come on the heels of a series of policy measures that Brazil has implemented since the start of the current administration. The 2025‑2027 Budget is designed to increase revenue by R$250 billion through tax reforms and to reduce unnecessary expenditures by R$180 billion. The resulting fiscal space, according to Guedes, will allow the government to maintain essential social programs while still making strides toward a deficit of 3.5% of GDP by 2027.

An earlier Reuters article linked in Guedes’ statement—titled “Brazil’s economy grows modestly, but fiscal pressures mount”—offers a more detailed look at how the country’s growth trajectory interacts with its fiscal situation. That piece notes that while GDP grew by 1.8% in 2024, the public debt grew by 2.1%, further widening the debt‑to‑GDP ratio. The article also highlights concerns from international investors that Brazil’s fiscal path might lead to a loss of confidence if growth does not materialize.

Looking Ahead

In concluding his remarks, Guedes emphasized that “fixing public finances is not a purely technical exercise; it is fundamentally about people.” He urged lawmakers to adopt a cohesive policy framework that balances fiscal discipline with investments in human capital, infrastructure, and technology. He also warned that a failure to stimulate growth could lead to a “debt spiral” that would necessitate more drastic fiscal cuts—potentially jeopardizing essential public services.

The Brazilian Ministry of Finance has scheduled a series of public hearings in the coming months to discuss the implementation of the fiscal responsibility plan. Analysts expect that the next round of policy adjustments will hinge on the government’s ability to demonstrate that its growth‑oriented reforms are producing measurable results.

In sum, Paulo Guedes’ statement underscores a core truth for Brazil’s fiscal future: economic growth is the linchpin that can turn fiscal consolidation from a burden into a sustainable reality. The world will be watching to see whether the country’s ambitious reform agenda can generate the momentum needed to steer Brazil out of a long‑standing fiscal impasse.