As Brazil enters a decisive stretch ahead of the 2026 election year, the federal government is juggling fiscal management, cabinet transitions, and coalition-building in key states while major institutions face renewed pressure. The National Treasury reported a 2025 deficit that, after exclusions allowed under the fiscal framework, remains within the official target range; at the same time, Civil House Minister Rui Costa confirmed he will leave at the end of March and be replaced by executive secretary Miriam Belchior. In parallel, Planalto is pushing to strengthen its electoral positioning—pressuring Fernando Haddad to run in São Paulo and backing Simone Tebet for the Senate—while Congress returns to Brasília to tackle expiring provisional measures and advance the INSS-related CPI. The Supreme Federal Court summarizes work amid internal disputes linked to the Banco Master investigation, and IBGE faces leadership and staffing turmoil just weeks before releasing the 2025 GDP results.
This Content Is Only For Subscribers
To unlock this content, subscribe to INTERLIRA Reports.
Deficit in Public Accounts
The central government’s accounts posted a deficit of R$ 61.7 billion in 2025, the third year of Lula’s (PT) current term, the National Treasury reported on Thursday (29/01). The result is worse than the R$ 42.9 billion deficit recorded in 2024, but it still indicates compliance with the fiscal target set by Finance Minister Fernando Haddad, thanks to amounts excluded from the calculation. The goal was a zero balance, with a tolerance margin allowing a deficit of up to R$ 31 billion. However, part of the spending tied to court rulings and actions in health, education, and national defense, as well as reimbursements of improper INSS (National Social Security Institute) deductions, are excluded from the target. Under the rule, therefore, the result was a deficit of R$ 13 billion, meeting the target within the tolerance band. The central government accounts include the National Treasury, the Central Bank, and Social Security.
Ministry of the Civil House
Civil House Minister Rui Costa confirmed on Thursday (29/01) that the ministry’s executive secretary, Miriam Belchior, will replace him as head of the office. Costa is expected to leave the government at the end of March so he can run for office in Bahia. He said the ministry’s team should remain largely unchanged. Belchior’s promotion had already been anticipated. She served as Planning Minister under Dilma Rousseff’s (PT) administration and has worked in PT governments since the 1990s. Since the first days of Lula’s government, she has held a more prominent role than other executive secretaries across the Esplanade.
Strategic Allies
Facing difficulties in building competitive tickets in strategic states, the government has intensified pressure for Minister Fernando Haddad to run for governor of São Paulo and has already consolidated Planning Minister Simone Tebet’s bid for the Senate in the state. The move is part of a Planalto Palace strategy to prevent President Luiz Inácio Lula da Silva from heading into the election with weak support in the country’s largest electoral districts. Advisers argue that local action is needed to keep centrist parties currently represented in the Esplanade from aligning with Bolsonaro-backed candidates. Given the difficulty of formally bringing these parties into a broader coalition, the approach has been to cultivate dialogue with their internal factions and prevent them from forming structured alliances with the opposition camp.
National Congress
The National Congress resumes work this week with an agenda focused on reviewing provisional measures issued by the government, awaiting businessman Daniel Vorcaro’s testimony before the INSS CPI, and navigating political maneuvering that also involves the Supreme Federal Court (STF). After the recess, party leaders return to Brasília seeking to revive issues that lost momentum at the end of last year and manage accumulating points of friction at the start of the legislative year. In the Chamber of Deputies, the immediate priority is voting on Provisional Measures (MPs) that are blocking the agenda or nearing expiration. Under a leaders’ agreement, the first items should be the “People’s Gas” MP, which creates a new Gas Assistance modality and provides free LPG cylinders for low-income families registered in the Unified Registry, and the measure providing financial relief and debt renegotiation for rural producers affected by extreme weather. In the Senate, attention is on the INSS (National Social Security Institute) CPI (Parliamentary Commission of Inquiry), which is investigating fraud in deductions applied to retirees and pensioners.
STF
Amid divisions over the fallout from the Banco Master investigation, the Supreme Federal Court (STF) resumes activities on Monday (02/02) facing the challenge of overcoming internal disputes and protecting itself from further wear throughout the election year, when tensions with the National Congress tend to rise. After a recess marked by an effort by STF President Edson Fachin to address the court’s image crisis, the opening of the 2026 judicial year is expected to bring together a nearly full bench. The expectation is that Fachin will deliver a speech defending the court. However, even among those closest to him, there is uncertainty over whether he will directly address what is seen as the central focus of his presidency: implementing a code of conduct for judges on higher courts. Fachin has support from a group of colleagues, but another faction is resisting moving the proposal forward at this time.
Crisis at IBGE
With just over a month to go before the release of the 2025 Gross Domestic Product (GDP) figures, one of the country’s most important economic indicators, IBGE (Brazilian Institute of Geography and Statistics) is seeing new developments in the prolonged crisis pitting career staff against the institute’s president, Marcio Pochmann. After management removed researcher Rebeca Palis from her position as coordinator of National Accounts a week ago, three employees from the unit responsible for GDP calculations are also leaving their posts. Staff members say these departures could affect deadlines for revisions and ongoing projects.
Analysis:
Brazil’s political and institutional landscape is entering a phase of managed instability as the government balances fiscal signaling, cabinet turnover, and early electoral positioning. The 2025 deficit figures, though worse in headline terms, were presented as compliant with the fiscal framework, reinforcing the administration’s message of responsibility while preserving socially and legally mandated spending excluded from the target. This strategy is politically useful in an election-adjacent year, but it also exposes the fragility of fiscal credibility when results rely more on exclusions than on sustained improvements in budget fundamentals.
At the same time, President Lula’s direct involvement in shaping candidacies in São Paulo and other strategic states reflects concern about maintaining strength in large electorates and preventing centrist allies from drifting toward the opposition. While this may help secure short-term alliances, it risks weakening congressional coordination just as provisional measures, high-profile investigations, and the INSS CPI return to the agenda. Added to this are institutional tensions in Congress, the Supreme Federal Court, and IBGE, where internal disputes and leadership crises threaten confidence in governance and economic data at a moment when political polarization and growth indicators carry heightened weight.
Sources: A Folha de SP [1], [2], [3]; O Globo [1], [2], [3], [4].
