Senate Approves Lula’s Fiscal Package Text but Its Effectiveness Is Uncertain

Overview

• The Senate approved the text-base of PLP 299/2026 on Thursday, Nov. 12, sending the bill to four separate highlights to be voted on Nov. 17 before it moves to the Chamber of Deputies.
• The government says the package will close R$50–60 billion of the 2027 fiscal gap while private analysts estimate a smaller direct impact and some investors expect additional measures that could raise the total to as much as R$80 billion.
• Markets punished the package this week with the real weakening to about R$5.65 per dollar and long-term interest rates moving back toward roughly 15 percent, which raises borrowing costs and narrows room for monetary easing.
• Political resistance from parts of Lula’s coalition, plus complaints from governors and the national municipal association, threatens to change or block measures that cut transfers, limit compensations and restrict certain tax expenditures.
• Economists warn the plan is a short-term patch that will not remove the need for a structural fiscal adjustment to meet the 2027 primary target and stabilize debt, and analysts say the appointment of the next finance minister will shape prospects for deeper reform.