One of the country's greatest experts in public accounts, Felipe Salto, chief economist at Warren Investimentos, looks at the market's excitement with a possible election of Senator Flávio Bolsonaro (PL) from afar. For him, the candidate's victory does not automatically guarantee an organization of public accounts.
Salto argues that, whatever the outcome of the elections, the winner must show immediately after the second round what the adjustment plan is, which will necessarily have to go through thorny issues, such as Social Security, constitutional floors, salary bonuses, parliamentary amendments, subsidies and subsidies and review of tax waivers.
The execution of the plan, however, should be spread over four years, in his view. He believes that Brazil is not in a position to receive an abrupt adjustment, which could even cause a recession in the country, he says.
For him, the presentation of a cohesive and effective plan to control public debt does not depend on changing fiscal rules. The economist believes that the current framework is sufficient to accommodate the necessary adjustments, with only a few specific changes, such as reducing the growth limit for public spending.
Check out the full interview.
What will be the weight of President Lula's electoral measures in the next government?
My number reaches R$48.6 billion in the budget, including measures for the MEI, the recomposition of Bolsa Família and the new pre-announced program for university students, in addition to Desenrola, which has an intersection with the renegotiation of MEI bank debts, and the PEC to reset public transport fares on weekends.
It is a significant fiscal pressure, but, in my scenario here at Warren, part of this was already incorporated into the calculations for the primary result, as in the case of the adjustment of Bolsa Família, for which we had assumed an assumption since June 2025. In any case, it is a delicate fiscal situation, even if far from insolvency.
As the PLOA [Annual Budget Law Project] of 2027 has not yet been approved by Congress, this topic will enter the dance. It will be necessary to organize next year's numbers, in detail, so that any surplus begins to appear.
Is a surplus feasible in 2027?
This objective, of generating some surplus [of 0.1% of GDP], is already in the PLOA. But the conditions to be achieved are still lacking. There is a lot of overestimated revenue, as in the case of CBS [Contribution on Goods and Services; new federal tax created in the tax reform], and expenses are underestimated, given the new pressures.
It is important to be clear about the starting point: I currently estimate a primary deficit of 0.38% of GDP for 2026. It is not the end of the world. It can be resolved with a good combination of experience, technical competence and political leadership. Let's not forget that the relevant measures depend on Congress.
Folha reported that Flávio's team wants to cut R$250 billion with corrections in Social Security, health and education. Can this cut size really be achieved with these measurements?
Everyone who focuses on public accounts knows that the current fiscal problem is divided into two parts: high growth in primary spending, especially mandatory spending, and an impeding level of tax spending, also known as tax waivers. Without attacking these two issues, nothing will be done. Regarding the proposal you mention, you need to see within what period the adjustment would materialize. In my opinion, it should be spread over the years, but it would have to be approved within a cohesive plan this year.
Social security issues, including military issues, constitutional floors, salary bonuses, Fundeb [Basic Education Maintenance and Development Fund], parliamentary amendments, subsidies and grants, the review of tax waivers and intergovernmental transfers, all of this, there is no way around it, will need to be debated. My proposal is the middle path. Brazil is not given to abrupt adjustments. In consolidated democracies, the Constitution gives the direction.
The Minister of Planning told Folha that, in a re-elected PT government, there will be an adjustment of accounts in 4 years. Like mr. Do you see this line?
This is precisely the line that I have proposed since 2024 in an article published in Ilustríssima with Josué Pellegrini. There is no point in making a sudden cut. It is not politically viable. GDP is already pointing to a 1% increase next year. Imagine if they made an abrupt fiscal adjustment. It would be the same as adopting recession as policy for the first year. This is not reasonable, it is not technically sustainable and it does not pass Congress. And the good thing is that advisors, side by side, know this.
Our simulations show that it would be possible to generate a surplus of around 0.3% of GDP next year until reaching something like 2% of GDP by 2030. The market would anticipate the positive effects of this on interest rates, immediately, as long as the plan is approved in Congress. Debt/GDP would still grow, but, depending on the evolution of interest rates, it could stabilize in a short time. This year's Nobel Prize winners teach us, by a plus b, that expectations matter.
How can the Lula government appeal to the market to convey credibility?
Right now, until the elections, the government is in "spend mode." The announced measures have a relevant fiscal effect, especially for 2027. At the same time, the other side is also on the defensive, because, in the midst of such a fierce second round, the task of promising adjustment becomes complex, as they did at some point. In this case, we will only be able to assess the ability to provide the correct signals after the second round of elections. Ideally, a complete plan should be presented, with adjustment in stages. It cannot be left to evaluate year by year or month by month. You must have an effective commitment from the first moment.
With current fiscal rules, can public debt be stopped in a short period?
He can. It is no longer a question of debating rules, but of approving adjustment measures. It is necessary to overcome this desire to, with each new mandate, create new fiscal rules. Those that are there already serve us very well.
Wasting time discussing fiscal rules is putting the preparation and approval of a plan of effective adjustment measures at risk.
In my opinion, it is enough to calibrate the parameters of the current framework, with a lower ceiling, that is, to change the spending growth limit from 2.5% to 1% in real terms. The key is to approve a plan quickly. That's the key. It is not a one-time adjustment, but a one-time plan to be followed exactly for four years.
Do the ventilated measures of a Flávio Bolsonaro government give confidence?
The market welcomed the senator's victory in the first round. This is undeniable. The rally in the stock market, in the dollar and in future interest rates happened. But my interpretation is a little different from what I observe. In fact, the market average sees that Flávio's election would be equivalent, almost automatically, to having a better-run economy, with reorganized public accounts. This is not necessarily true.
Both candidates will need to face reality on October 26th, because it will impose itself. The market will only remain optimistic if a fiscal consolidation program is truly designed to match a high and growing debt such as the current one.
X-ray - Felipe Salto, 39
Chief economist and partner at Warren Investimentos, he was Secretary of Finance and Planning of the State of São Paulo (2022) and the first executive director of the IFI (Independent Fiscal Institution) of the Senate. He is a member of the Superior Council of Economics at Fiesp and professor of public finance at IDP. He has a degree in economics and a master's degree in Public Administration and Government, both from FGV. He holds the Jabuti Prize in Economics (2017) and was Economist of the Year by OEB (2023).
