Brazil's economic challenges facing re-elected President Lula

Brazil's re-elected President Luiz Inacio Lula da Silva faces five major economic challenges as his fourth term begins in January, including soaring public debt, high interest rates, and persistent inflation that threaten growth and fiscal stability. Public debt has surged over 10 percentage points to more than 82% of GDP during Lula's current term, driven by rising mandatory spending that leaves under 8% of the federal budget adjustable. Inflation at 4.6% remains above the central bank's tolerance range despite interest rates at 13.75%, while a record nearly 84 million Brazilians and 9.3 million businesses are behind on debt payments. Lula's reform agenda faces obstacles from a conservative Congress, with the Liberal Party and allies set to control both chambers. Additionally, a sweeping consumption tax overhaul approved in 2023 remains incomplete, as the government has not disclosed the effective rate or sent Congress a bill to regulate new taxes on harmful products.