“Beware of These Numbers”: BTG’s Mansueto Almeida Warns of Structural Risks in Brazil’s Economy
- Brazil’s Growth: A Mirage Built on Commodities?
- Why Are Brazil’s Interest Rates Stubbornly High?
- Stock Market Boom: Made in Brazil or Imported?
- Fiscal Progress—But at What Cost?
- The Inevitable Fiscal Reckoning
- Q&A: Key Takeaways from Mansueto’s Warning
Brazil’s economy has defied expectations in recent years, posting growth rates that consistently outpace market projections. But beneath the surface of these rosy numbers lies a structural fiscal problem, warns Mansueto Almeida, chief economist at BTG Pactual. In this analysis, we break down his concerns—from soaring public spending to unsustainable interest rates—and what they mean for Brazil’s future.
Brazil’s Growth: A Mirage Built on Commodities?
Brazil’s GDP grew by 3.2% in 2025, surpassing the 2.9% market forecast. In 2026, early estimates suggested a modest 1.5% expansion, but the country surprised again with 3.4% growth. However, Mansueto cautions that this performance is misleading. "Last year’s growth was driven by extractive industries—oil production and agriculture—not recent policy decisions," he noted at a recent event. These sectors, while competitive, benefit from long-term structural advantages, not short-term economic fixes. Meanwhile, high interest rates (currently 15%) continue to hammer retail and manufacturing. Even if rates drop to 12% by year-end, Brazil’s real interest rate of ~8% (with inflation at 3.9%) remains wildly out of equilibrium.
Why Are Brazil’s Interest Rates Stubbornly High?
With inflation under control, why won’t rates budge? The answer, Mansueto argues, lies in runaway public spending. Federal expenditures have ballooned by 20% in real terms over four years—a staggering figure for an economy nearing full employment (unemployment: 5.1%). "When you stimulate demand under these conditions, you get inflation. The only tool left is maintaining the world’s highest real interest rate," he explains. Government officials, including President Lula, routinely question the central bank’s stance, but Mansueto insists the problem is fiscal, not monetary.
Stock Market Boom: Made in Brazil or Imported?
Brazil’s stock market has surged ~25% in dollar terms this year, with January seeing record foreign inflows of R$26.31 billion—more than all of 2025. But Mansueto attributes this to global, not domestic, factors. "Look at Colombia, Peru, Chile—their markets also rallied," he says. The shift stems partly from uncertainty around U.S. economic policy under Donald Trump. "When the U.S. sneezes, emerging markets catch a liquidity cold. But Brazil’s underlying issues haven’t gone away."
Fiscal Progress—But at What Cost?
The primary deficit improved from 2.4% of GDP (R$240 billion) in 2025 to an estimated 0.4% (R$50 billion) in 2026. Yet Mansueto notes this came via tax hikes, not spending discipline. Brazil’s tax burden already hovers at 34% of GDP. "Raising IOF taxes while promoting credit growth is contradictory. We won’t fix this by further squeezing taxpayers," he argues.
The Inevitable Fiscal Reckoning
With elections looming, Mansueto stresses that fiscal reform will be unavoidable for any administration. "Controlling public spending isn’t impossible—it just takes political will," he says, recalling his 2016 efforts to cap federal expenditure growth at 0% via the "Spending Ceiling" constitutional amendment. "Brazil doesn’t need more taxes. It needs to stop treating its treasury like a bottomless buffet."
Q&A: Key Takeaways from Mansueto’s Warning
Is Brazil’s growth sustainable?
No—it’s overly reliant on commodities and ignores structural weaknesses in industry and retail, exacerbated by high interest rates.
What’s driving Brazil’s stock market rally?
Global capital flows, not domestic fundamentals. Emerging markets broadly benefited from U.S. policy uncertainty.
Can Brazil fix its fiscal problems without austerity?
Unlikely. With a 34% tax burden, further revenue increases risk stifling growth. Spending discipline is the only viable path.
