By Marcela Ayres and Bernardo Caram
BRASILIA, April 9 (Reuters) - Brazil will keep trimming its budget this year despite elections and will likely turn in 2027 to an unprecedented use of stricter curbs on public spending and tax breaks under its fiscal framework, the Planning Ministry's executive secretary told Reuters.
In his first interview since being appointed to the role on Wednesday, Guilherme Mello, previously head of the Finance Ministry's Economic Policy Secretariat, said his move signals
closer coordination between the ministries, with a focus on strengthening mechanisms to manage the federal budget.
His comments aimed to tamp down on concerns about looser fiscal policy in the run-up to Brazil's presidential election and speculation about a more populist turn by leftist President Luiz Inacio Lula da Silva, who is seeking a fourth term.
"Every year under President Lula's government there have been measures to improve revenues, spending, management and the design of benefits and social programs. This year will be no different just because it is an election year," Mello said.
"We do this not through big packages or grand plans, but through continuous adjustment measures, on both the spending and revenue sides, which have proven effective," he added, stressing that the government will stick to a gradual approach of balancing fiscal sustainability with social priorities.
Mello said mechanisms to cap certain expenditures will be triggered, after the central government posted a primary deficit equivalent to 0.4% of gross domestic product in 2025. The 2027 budget guidelines bill will be sent to Congress next week.
A 2024 fiscal package introduced automatic adjustment triggers into Brazil's fiscal framework if deficits occur from 2025 onward. One such trigger bans the government from granting, expanding or extending tax incentives.
Another caps personnel spending across all branches of government from 2027 to 2030 at the framework's minimum real spending growth rate of 0.6% a year.
Federal payroll expenses rose 4.3% above inflation last year, to 408 billion reais ($80.3 billion), Treasury data show.
"Brazil has always had triggers that were never activated. Now they will be," Mello said.
Triggers currently can be suspended only in cases of public calamity, though the government this year passed an exception in Congress to revive expired tax incentives for data centers.
Mello said the government will formalize a 2027 primary surplus target of 0.5% of GDP, with a 0.25‑percentage‑point tolerance band, calling the goal challenging but achievable.
($1 = 5.0833 reais)
(Reporting by Marcela AyresEditing by Brad Haynes)
