Core Viewpoint - Brazil's federal government debt is approaching unsustainable levels, projected to reach 84.3% of GDP by 2028, up from a previous estimate of 81.8% at the end of last year [1][2] Group 1: Debt Projections and Economic Indicators - By 2025, Brazil's government debt-to-GDP ratio is expected to rise to 79%, compared to 76.5% in 2024 [2] - Moody's downgraded Brazil's credit rating outlook from "positive" to "stable" due to slow reform progress and rigid spending [2] - The Senate's Independent Fiscal Institution predicts that by 2035, Brazil's debt could reach 124.9% of GDP [2] Group 2: Structural Issues and Fiscal Challenges - High interest rates and rigid spending are creating a "fiscal vicious cycle," with mandatory expenditures growing faster than disposable income [3] - Brazil's benchmark interest rate has been raised to 15%, with real interest rates at 9.76%, the second highest globally [2][3] - The government aims for a zero primary deficit by 2025, but allows for a deficit of 31 billion reais (approximately 0.25% of GDP) [3] Group 3: External Factors and Policy Responses - Recent U.S. tariffs of up to 50% on certain Brazilian products add uncertainty to Brazil's economic outlook [4] - The government is implementing emergency plans to support affected industries without relying on large-scale fiscal subsidies [4] Group 4: Recommendations and Future Outlook - Experts suggest that controlling spending is crucial, recommending measures such as freezing welfare increases and limiting public sector wage growth [5] - To stabilize debt under current conditions, a primary surplus of 2.1% of GDP is needed, assuming interest rates drop to 4%-5% and economic growth averages 2.2% annually [5] - Without reforms, the next president in 2027 may face a deep fiscal restructuring challenge [5][6]