2026 - Edition 108 | October 20

The next government will have to face the growth of public debt and create conditions for Brazil to grow again and expand opportunities for social ascension

Hello reader,

In a few days, Brazilians will return to the polls to choose, in a second round, the president of the Republic who will govern the country for the next four years. More than a dispute between candidates, the election should represent an opportunity to reflect on the enormous structural challenges that Brazil will have to face.

Among them, two deserve special attention: recovering the sustainability of public accounts and building a society in which opportunities for economic and social progress depend less and less on the condition of one’s birth. Although often treated as independent issues, these challenges are deeply related.

Brazil comes into this election with a worrying fiscal situation. According to data from the Central Bank, the gross debt of the general government, which represented 51.3% of GDP in 2011, reached 81.9% in June 2026. More worrying than its size are the growing trajectory of indebtedness and the high cost of its financing.

When debt grows persistently, the perception of risk increases, putting pressure on interest rates. High interest rates, in turn, increase the government's financial expenses, make credit more expensive, discourage investments, and hinder the expansion of companies and the generation of jobs. A perverse circle is formed that compromises economic growth and fiscal sustainability itself.

The social consequences are equally serious. The increase in debt charges restricts the resources available for investments and public policies. Education, early childhood, sanitation, infrastructure and professional training start to compete for increasingly limited portions of the budget. It is precisely at this point that fiscal sustainability encounters the central issue of social mobility.

Brazil remains a society in which family origin exerts enormous influence on future opportunities. Data from the Atlas of Social Mobility, developed by IMDS in partnership with Prospera Lab, show that only 8.3% of the children of families in the poorest 25% manage to reach the richest 25% in adult life. Among the children of families belonging to the richest 25% group, 56.5% remain in this position.

Breaking this persistence requires quality public policies, but it also requires economic growth, investment and the generation of good jobs.

Studies carried out by IMDS on the first generation of Bolsa Família beneficiaries show that, although many young people have left the social protection system, a significant portion remain in a situation of vulnerability. Overcoming poverty in the long term requires more than income transfers: it requires quality education, professional qualification, and effective opportunities for productive insertion.

Another study by the Institute revealed that municipalities with higher rates of formalization of young people from the Bolsa Família tend to have higher levels of intergenerational mobility. The quality of education, labor market conditions, and local infrastructure are also associated with better opportunities for social ascension.

However, it is not enough to improve schooling if the economy is not able to offer jobs compatible with the training of young people. In the last four decades, despite educational advances and the expansion of the workforce, our economy has grown, on average, by only 2.1% per year. Productivity remains low, informality is high, and opportunities for economic ascension remain limited. The situation becomes even more worrying in the face of the rapid aging of the Brazilian population, which will increase the pressures on social security, health, and social assistance systems.

The next government will therefore have to simultaneously face the challenge of stabilizing public debt, recovering economic growth, and expanding opportunities for social mobility. This will require reviewing the dynamics of mandatory spending, improving the efficiency of public spending, stimulating private investment, and strengthening social policies capable of producing lasting results.

There is no contradiction between fiscal responsibility and social responsibility. The second round of elections should be an opportunity to discuss not only what we will do in the next four years, but, above all, what country we want to build in the coming decades. The debt we accumulate today will be borne by the next generations who, as a result, will have their opportunities even more restricted.

The great risk is that we transfer to the next generations not only a growing financial debt, but also a social debt, expressed in the persistence of poverty and the absence of opportunities.

If we want a Brazil in which family origin determines less and less the destiny of each individual, we need a dynamic, productive economy capable of generating good jobs. And we need a financially sustainable State, capable of financing quality public policies.

Fiscal sustainability is not an obstacle to social mobility. It is an indispensable condition for making it possible.

See you in the next "Letter from IMDS"!

Paulo Tafner
CEO