Brazil is currently grappling with significant economic challenges, characterized by high inflation and increasing national debt. Just before the Christmas holidays, the Brazilian financial sector was shaken by a sharp decline in the national currency, prompting urgent interventions from the Central Bank to stabilize the real, which nearly fell below 6.30 reais per dollar.
While the immediate crisis has somewhat subsided, experts predict that by 2025, the exchange rate could reach 6.25 reais per dollar, with potential for further devaluation, possibly hitting 7 reais per dollar. The depreciation of the real underscores the structural issues facing Latin America's largest economy, including a minimum wage now equivalent to only 251 U.S. dollars.
The public debt is also a growing concern, with estimates indicating a rise to approximately 78 percent of GDP, reversing a previous decline to 72 percent during the latter part of the last administration. Economists emphasize the need for the government to collaborate with Congress to implement budgetary reforms and address excessive social spending, which has been underestimated by about 80 billion reais.
President Luiz Inácio Lula da Silva's administration, which includes nearly 40 ministries, faces criticism for its lack of a comprehensive plan to tackle these economic issues. Economic experts warn that without a clear strategy for fiscal adjustment, reversing the current economic trajectory will be challenging.
The Brazilian population is feeling the impact of rising prices, particularly in food and energy, with the official inflation rate closing 2024 at 4.83 percent, exceeding the Central Bank's target of 4.5 percent. This inflationary pressure has contributed to declining public approval ratings for Lula's government, with only 27 percent of voters expressing positive views on his first two years in office.
As the debt is projected to peak by 2030, experts call for urgent spending cuts, which could affect minimum wage increases. The minimum wage, effective January 1, now stands at 1,518 reais (256 dollars) and is received by 19 million pensioners. Economists stress the importance of implementing stricter fiscal measures to mitigate perceived risks and restore balance between public debt and GDP.