Brazil’s Senate Approves New Rules for Court-Ordered Debt Payments

• Brazil’s Senate approved the main text of court-ordered debt rules.
• The legislation aims to change fiscal accounting starting in 2027.
• Senators’ first vote paves the way for potential fiscal success.

Senate Approves Constitutional Amendment on Debt Payments

On Wednesday, Brazil’s Senate took a significant step by approving the main text of a constitutional amendment designed to reform how the government handles court-ordered debt payments. This legislation, which aims to alter accounting methods beginning in 2027, could play a decisive role in helping Brazil meet its fiscal targets, which previously seemed almost out of reach. The approval in this initial vote is a crucial milestone, yet it must clear a second round in the Senate to officially become law, following the earlier green light from the lower house.

Details of the Approved Legislation and Its Implications

Under the new amendment, payments stemming from court decisions against the government will gradually factor into the calculations of the fiscal targets starting in 2027. Specifically, the legislation stipulates that at least 10% of the total estimated court-ordered debt will need to be included in the fiscal target each year. This gradual integration aims to provide a clearer financial picture for the government, making it easier to manage the escalating financial obligations resulting from numerous court decisions.

Brazil’s Senate has taken a crucial step towards redefining its accounting for court-ordered debt, potentially paving the way for improved fiscal responsibility. The approved constitutional amendment, while still pending a second vote, provides a structured approach to integrating these payments into fiscal calculations, aiming for an annual inclusion of at least 10% starting in 2027. This move could significantly aid Brazil in achieving its long-term fiscal goals, which were previously deemed unattainable.