By Camilo Diniz
The U.S. dollar surged against the Brazilian real on Thursday (Nov. 12), closing at R$ 5.6507 (Brazilian reais), its highest closing level since June 2, 2025. The gain of 1.58% signals that financial markets did not buy the 2027 fiscal package presented by the government of President Luiz Inácio Lula da Silva, of the Workers' Party (PT). The source site described it as the biggest rise of the year.
Put simply: investors looked at the measures, judged them insufficient and moved into the dollar.
Lula fiscal package fails to convince markets
The day before, the government unveiled a set of fiscal actions. According to Planning Minister Bruno Moretti, they should generate an impact of R$ 50 billion to R$ 60 billion (Brazilian reais) in 2027, with a larger effect in the following years.
The problem, according to the report, is that the plan does not change the primary surplus targets. A primary surplus is the budget balance before interest payments on public debt. The debt trajectory, the article says, remains on the same path.
Capital Economics said in a note that the proposal for next year "falls short of expectations." For financial players, the amounts were below what is needed. Added to that is doubt over what Congress will actually approve, which left the exchange rate under pressure.
"The uncertainty over what will actually be approved by lawmakers leads investors to seek dollar cover," said Vitor Kayo, senior economist at Nomad.
Brazil inflation remains above the target ceiling
Brazil's official consumer price index, the IPCA, rose 0.14% in October, below what the market had projected. But the relief was short-lived. Over 12 months, inflation accelerated to 4.63%, up from 4.58% the previous month.
That is above the ceiling of the country's continuous inflation target. The target is 3.0%, with a tolerance margin of 1.5 percentage points either way, which puts the ceiling at 4.5%. In September, the monthly increase had been 0.82%.
Global factors also lifted the dollar
The external backdrop pushed the U.S. currency higher as well. Yields on U.S. Treasuries rose, and bets on higher interest rates in the United States are growing. Federal Reserve officials said inflation remains elevated, and some left room for a 50-basis-point hike if price pressures do not ease.
On Thursday morning, San Francisco Fed president Mary Daly said the central bank will probably have to raise rates further, but that this does not need to happen in a rush. By the end of the day, the dollar index, which measures the U.S. currency against a basket of six others, was up 0.28% at 103.160.
What comes next
At 5:08 p.m., the December dollar future was up 1.20%, trading at R$ 5.6695 on the B3, the São Paulo stock exchange. The market's reading, according to the report, is straightforward: until Congress says what it will approve, the exchange rate remains hostage to distrust. The next test is the vote on the measures.
Why it matters
A weaker real raises the cost of imported goods and can feed inflation, which is already above the official ceiling. Fiscal credibility, meaning whether the government can control spending and public debt, is a central factor for investors in Brazil. Lula's government is therefore under scrutiny over whether its plan changes the debt path or simply adds measures without altering the targets.
VDD Analysis
The government promises between R$ 50 billion and R$ 60 billion, but does not change the targets, and the market does not believe in the result. For those who defend fiscal responsibility, the script is familiar: without real control of spending, the bill ends up with the citizen, in the form of inflation above the ceiling and a more expensive dollar.
