Brazilian Senate Approves R$30 Billion Defense Carve-Out From Fiscal Framework

Overview

• The Senate passed PLP 204/2025 by 57–4 to exclude up to R$5 billion a year for six years from the spending cap and primary target, sending the bill to the Chamber of Deputies.
• The package draws on surpluses from Army, Navy and Air Force funds and requires at least 40% of the resources be used for investments while shielding strategic projects from contingency blocks and removing sector arrears from the primary result.
• For 2025, the text allows excluding up to 60% of the annual amount (R$3 billion) from the fiscal rules, subject to final approval by the Chamber.
• Funds would support programs such as the Sisfron border system, the nuclear submarine project, renewal of Gripen fighter jets and modernization of ships and cruise‑missile systems.
• The Senate’s Independent Fiscal Institution estimates exemptions could total about R$157.3 billion from 2024 to 2026, cautions that exclusions do not prevent debt from rising, and says roughly R$27.1 billion is still needed this year to meet the fiscal result; Finance Minister Fernando Haddad opposed the carve‑out as the ministry readies bills to replace the rejected MP 1.303 and target about R$31.7 billion in 2026.