Brazilian Supreme Court Creates New 22.5% Bonus and Signals Fiscal Regress to the Market

Analyzing the portal's recent archives, it is evident that the country is experiencing a scenario of austerity under pressure, where political instability and institutional uncertainty continuously deteriorate market confidence. Through the lens of credit and liquidity cycles, it is clear that the expansion of current spending and privileges in the public sector drains resources that could otherwise irrigate private activity. When the State consumes a larger slice of the financial pie to fund its own apparatus, overall market liquidity is affected, demanding structurally higher interest rates to attract foreign capital and finance growing public debt.

The new bonus of up to 22.5% adds to a recent history of easing rules on judiciary compensation. In March of this year, the STF itself limited the payment of extra allowances to the equivalent of 35% of the civil service ceiling, which today stands at R$ 46.3 thousand, allowing judges to receive about R$ 16 thousand beyond their basic subsidy. With the institution of the 5% length-of-service bonus every five years, actual earnings can reach R$ 78 thousand per month. These figures show that, under the pretext of respecting the constitutional ceiling, parallel mechanisms are created that raise the unit cost of public service and reduce the allocative efficiency of the federal budget.

Projecting developments for the coming months, the short- and medium-term scenario demands redoubled caution. Over the next 30 days, the political repercussion of GAACTA is expected to keep the risk premium high, limiting consistent further drops in the dollar below R$ 5.15. In 90 days, the release of the federal government's revenue and expenditure assessment reports may reveal the need for new budget freezes to compensate for the vegetative growth of the civil service payroll. In 180 days, the persistence of high spending and the difficulty in meeting fiscal targets may consolidate inflation at levels above the target's center, forcing the Central Bank to keep the Selic rate at restrictive levels for longer.