On Tuesday, April 15, 2025, the federal government of Brazil submitted the Budget Guidelines Law Project (PLDO) for 2026 to the National Congress, outlining significant economic projections for the upcoming year. Central to the proposal is an anticipated increase in the minimum wage, which is expected to rise to R$ 1,630, reflecting a nominal increase of 7.37% from the current minimum wage of R$ 1,518.
This adjustment follows the projection of a 4.76% increase in the National Consumer Price Index (INPC) for the 12 months ending in November, combined with a spending growth ceiling of 2.5% above inflation, as mandated by the government's fiscal framework. The PLDO also provides preliminary estimates for future minimum wages, forecasting R$ 1,724 for 2027, R$ 1,823 for 2028, and R$ 1,925 for 2029.
Each increment of R$ 1 in the minimum wage is estimated to impact the federal budget by approximately R$ 400 million. This is due to the linkage of various social benefits, including pensions, unemployment insurance, and other welfare programs, to the minimum wage. According to the Ministry of Planning and Budget, the adjustment will lead to an increase of R$ 115.3 billion in social expenses, alongside a projected R$ 71.2 billion increase in revenue from these adjustments.
The government also reaffirmed its target of achieving a primary surplus equivalent to 0.25% of the Gross Domestic Product (GDP), with a tolerance margin of 0.25 percentage points. This surplus target is crucial, especially as it allows for a neutral fiscal result, meaning a zero deficit without breaching the set fiscal goals. The official target for 2026 is a positive balance of R$ 34.3 billion, although if certain expenses, particularly regarding court-ordered payments (precatórios), were included, the projection could shift to a negative balance of R$ 16.9 billion.
In the context of these fiscal goals, the government aims for more ambitious surpluses in the following years, targeting 0.5% of GDP in 2027, 1% in 2028, and 1.25% in 2029. These projections are part of a broader strategy to stabilize Brazil's public finances and manage expenditures effectively.
Minister of Finance Fernando Haddad emphasized the importance of these projections, stating, "The adjustments we are proposing are essential for maintaining the fiscal balance while supporting the most vulnerable segments of our society." The proposal is expected to undergo scrutiny in Congress, where the Budget Committee will evaluate its implications before moving forward to a vote.
Under current regulations, the minimum wage is adjusted based on a formula that considers the INPC and the GDP growth from two years prior. However, a new rule established in late 2024 caps the real growth of the minimum wage to a maximum of 2.5% above inflation, a shift from previous practices that allowed for more significant increases based on economic performance.
As the government prepares for the upcoming elections, the PLDO serves as a foundational document for the annual budget, which must be submitted to Congress by August 31. This year's proposal comes with the added complexity of navigating the political landscape, as the budget must be approved by July 17, 2025, to avoid delays similar to those experienced in previous years.
In addition to the adjustments to the minimum wage, the PLDO outlines a series of socio-economic measures aimed at expanding support for marginalized groups, including domestic workers and traditional communities. The government aims to ensure that these populations receive adequate resources and support as part of its commitment to social equity.
The 2025 budget, which was sanctioned just days before this new proposal, included an increase in the minimum wage to R$ 1,518, representing a real growth of 2.5% compared to the previous year. This increase was part of a broader strategy to combat economic inequality and support low-income families.
As Brazil moves forward, the implications of these fiscal measures will be closely monitored by economists and policymakers alike. The government's ability to balance growth with fiscal responsibility will be critical in shaping the nation's economic landscape in the coming years.
Overall, the PLDO for 2026 not only sets the stage for the minimum wage adjustments but also reflects the government's broader economic strategy aimed at achieving sustainable growth while addressing the needs of its citizens. With the upcoming vote in Congress, all eyes will be on how these proposals will be received and implemented in the face of Brazil's complex economic challenges.
