Brazil’s economic and political landscape in 2025 is a study in contrasts: robust growth figures and heated debates about fiscal discipline sit alongside contentious reforms to the country’s political ethics laws. As the nation approaches a pivotal election cycle, the interplay between economic performance and the rules governing political eligibility has rarely been more pronounced. With President Luiz Inácio Lula da Silva’s recent veto of proposed changes to Brazil’s landmark Clean Record law, the country finds itself at a crossroads, balancing progress with persistent challenges.
Economic news has provided moments of optimism. According to Exame, Brazil’s economy grew by a surprising 3.4% in 2024, far outpacing the market’s January forecast of 1.6%. This marks the second consecutive year of growth above 3%, driven by government fiscal expansion, a resilient labor market, and robust credit conditions. Andrea D’Amico, CEO of Busysidebrazil Economic Consultancy, emphasized, “The economy has had a robust development. Fiscal expansion explains part of the surprise. Another part comes from credit, which has grown exceedingly both for the physical person and juridical person, besides the very resilience of the job market itself.”
Yet, this good news comes with asterisks. Inflation, as measured by the IPCA index, has consistently exceeded targets from October 2024 through 2025. The Central Bank responded with a volatile monetary policy: the Selic interest rate dropped from 11.25% in January 2025 to 10.5% in July, only to reverse course and climb to 15% by September as inflation expectations became unanchored. The result? Brazil now faces some of the highest interest rates in the world, a situation that has left the private sector wary and, in the words of economist Samuel Pessoa of Fundação Getulio Vargas, “intimidated.”
The fiscal situation has also grown more precarious. On November 28, 2024, Economy Minister Fernando Haddad announced a R$70 billion cost-cutting package over two years and an income tax exemption for those earning up to R$5,000 a month. While these measures were intended to restore market confidence, they had the opposite effect. The US dollar surged to 6.19 Brazilian reais, and future interest rates soared. The General Government Gross Debt (DBGG) rose to 76.5% of GDP in 2024, up from 73.8% the previous year, with projections that it could peak at 84.3% by 2028. BTG Pactual noted, “The perspective of the continuous growth of public debt has elevated fiscal risk and contributed to a significant currency depreciation through the year.”
External factors have only added to the complexity. The US dollar index (DXY) climbed from 102.4 in January 2024 to 108.9 by year’s end, indicating a strengthening American currency and a weakening of emerging market currencies like the real. The Brazilian real depreciated by 25% against the dollar by mid-December 2024, with some institutions predicting a dollar could reach 7 reais in 2025. Meanwhile, the Federal Reserve in the US cut interest rates less aggressively than expected, reducing its rate from 4.75% to 4.25% in September 2025, which reduced the attractiveness of emerging markets to investors.
Despite these headwinds, there have been glimmers of hope. Fabio Kanczuk, former director of Economic Policy at the Central Bank, highlighted that the real appreciated more than 15% against the dollar from January to mid-September 2025, falling from 6.20 to 5.30 reais per dollar. “The fall of the dollar from 6.20 to 5.30 reais has had a positive effect on inflation,” he explained. Still, the underlying issues of high debt, persistent inflation, and structural productivity challenges remain unresolved.
Into this economic maelstrom stepped a heated debate over political eligibility and integrity. On September 29, 2025, President Lula vetoed key sections of a supplementary bill that would have reduced the period of ineligibility for politicians convicted by the courts under Brazil’s Clean Record law. As reported by Valor Econômico, the vetoes targeted two articles that would have shortened the legal ban on running for office—a move that would have benefited figures such as former Federal District governor José Roberto Arruda, former lower house speaker Eduardo Cunha, and former Rio de Janeiro governor Anthony Garotinho.
The Clean Record law, celebrating its 15th anniversary this year, currently imposes an eight-year ineligibility period that starts only after a politician’s term has ended, often extending the ban to well over 15 years. The proposed bill, authored by congresswoman Dani Cunha, would have allowed the ban to start from the election in which abuse occurred, the conviction by a collegiate court, or resignation from office, and capped the maximum ban at 12 years even in cases of multiple convictions arising from different proceedings. It also sought to prevent more than one ineligibility penalty for cases linked to the same facts.
Supporters of the reform, including Senate President Davi Alcolumbre, argued it was time to modernize the law. “I strongly support this modernization, this update to the Clean Record law, to reflect the original intent of lawmakers when it was passed. Ineligibility cannot be eternal. The law says eight years—it cannot be nine or twenty. My vote is yes,” Alcolumbre declared during the session in early September. However, opponents, particularly in the Federal District, worried that the changes could reinstate eligibility for convicted politicians, undermining public trust in the system.
The timing of the bill’s resurgence was notable, coming after former President Jair Bolsonaro was convicted by the Supreme Court for attempting a coup. Although the reform would not have applied to Bolsonaro’s case, its political implications were clear. The bill had spent two years bouncing on and off the congressional agenda due to a lack of consensus among party leaders, only gaining momentum after Bolsonaro’s conviction.
President Lula’s veto message emphasized the need to uphold equality, legal certainty, and the finality of court rulings, citing established Supreme Court precedents. The decision preserves the status quo, ensuring that convicted politicians remain barred from office for potentially extended periods. For many, this is a reaffirmation of Brazil’s commitment to clean politics, even as the country grapples with the realities of political and economic turbulence.
All this unfolds as Brazil’s 2026 election scenario looms ever larger, shaping both economic and political expectations. The question of whom Jair Bolsonaro will endorse—perhaps his wife, Michelle Bolsonaro, or São Paulo governor Tarcísio de Freitas—remains unanswered, adding another layer of uncertainty. As Fabio Kanczuk observed, “This scenario seems calm, but depending on Bolsonaro’s decision, there are totally different paths.”
Brazil’s future, then, rests on a knife-edge. The nation’s ability to sustain growth while taming inflation and public debt will depend on deft management and, perhaps more importantly, on the integrity of its political system. As debates over the Clean Record law and fiscal discipline continue, Brazilians are left to ponder whether the country can achieve the elusive balance between prosperity and probity.
