Senate Approves Base Text of Lula's Fiscal Adjustment Package

Overview

• The Senate approved the text‑base of PLP 299/2026 by 45–31 on Thursday, moving the government's fast‑track fiscal package to separate votes on four key destaques and then to the Chamber of Deputies.
• The approved text expands the executive's power to block budget spending and caps real spending growth at 2.0% in years when containment is triggered to help reach the center of the fiscal target.
• Revenue measures in the draft include a further linear 10% cut in tax benefits (adding to a 2025 cut) and a provision to limit use of tax credits to offset liabilities, though the tax‑credit restriction still requires separate approval.
• Major items still unresolved include four Senate destaques scheduled for Nov. 17 and later Chamber votes on Lei Kandir transfers, limits on tax‑credit compensations, and other carve‑outs that will determine the bill's final fiscal reach.
• The government estimates a provisional R$45–60 billion improvement for 2027 but analysts warn the measures may not fix longer‑term debt pressures and the package creates near‑term fiscal and regional trade‑offs for states, health funding and industry.