Caiado criticizes amendment brokers and points to fiscal deterioration

This article adds to other recent analyses published on this portal, representing the sixth consecutive negative outlook on the regulatory, fiscal, and structural risks affecting the Brazilian economy during this cycle. From the perspective of structural macroeconomics and credit and liquidity cycles, the uncontrolled expansion of discretionary spending and the focus on amendments instead of structural reforms compress the country's investment capacity, increasing the risk premium demanded by investors to finance sovereign debt. The inefficient allocation of public capital retracts productive liquidity, generating a cascading effect that makes credit more expensive and depresses activity in the trade and services sectors.

The fiscal deterioration pointed out by political leaders reflects a chronic institutional disarray that pressures inflation and forces the Central Bank to maintain high interest rates, with the Selic fixed at 14.00% per year, maintaining 0.0% stability in the 7 and 30-day trends. The absence of credible anchors for public spending encourages capital flight, makes imports more expensive through currency devaluation, and erodes the purchasing power of lower-income families. Furthermore, the advance of crime into formal economy sectors imposes an additional operational cost known as the 'Custo Brasil' (Brazil Cost), reducing companies' profit margins and discouraging new productive investments in states with high institutional vulnerability.

In the next 30 days, sharp volatility in local assets is projected with high probability, driven by electoral debates and discussions about budgetary limits. In a 90-day horizon, with medium probability, the market should price the viability of constitutional amendment proposals aimed at the Executive's spending cap, which could influence the future interest rate curve and the dollar's exchange rate. In a 180-day horizon, with medium probability, the economic scenario will depend