Lula Government Proposes 2027 Budget with Primary Surplus and Minimum Wage Increase

The government of Luiz Inácio Lula da Silva has submitted the 2027 Annual Budget Law project (PLOA) to the National Congress, projecting a primary surplus of R$ 18.6 billion, which represents 0.13% of the GDP. While the official fiscal target is a surplus of 0.5% of the GDP, or R$ 73.2 billion, the government's effective projection is lower due to various fiscal adjustments and exceptions. Total expenditures are estimated at R$ 2.83 trillion, with mandatory spending accounting for approximately 92% of primary expenses. Pension benefits alone are expected to cost R$ 1.16 trillion, an increase of R$ 87.5 billion over 2026 estimates.

The proposal includes a projected minimum wage of R$ 1,741, representing a 7.4% increase over the current R$ 1,621. This adjustment follows a policy of granting gains above inflation. Additionally, the government has reserved R$ 44.8 billion for mandatory parliamentary amendments, an increase of R$ 4 billion compared to 2026. The budget also allocates R$ 97.9 billion for subsidized credit lines, which the government notes could result in an implicit cost of R$ 20.5 billion to the public debt.

On the revenue side, the government expects to collect R$ 677.9 billion from new taxes introduced by the tax reform, including the Contribution on Goods and Services (CBS) and a Selective Tax on products harmful to health or the environment. The budget also includes a R$ 6 billion injection for the state postal service, Correios. Regarding court ordered debts, the government predicts R$ 97.7 billion in precatórios, with R$ 38.4 billion of that amount being incorporated into the fiscal target as required by a 2025 constitutional amendment.

Outlets with a center lean highlight the tension between the government's surplus goals and the pressure of rising public debt and parliamentary spending. Center left outlets emphasize the social benefits of the minimum wage increase and the government's commitment to keeping the accounts in the blue.