Brazil’s defense budget is impacted by fiscal adjustment

Por

2 August, 2024

On July 30, the Brazilian government published, in an extra edition of the Diário Oficial da União (DOU), the Decree No. 11,927/2024, which establishes “the budgetary and financial programming of the Executive Power for the fiscal year 2024,” as well as a schedule of monthly disbursements.

In practice, this instrument, anticipated by the market, defines a containment of more than R$ 15 billion (USD 2.65 billion) in the federal government’s discretionary spending for this year. Of this total, R$ 11.2 billion (USD 1.98 billion) corresponds to blockages and R$ 3.8 billion (USD 0.67 billion) to contingencies.

Summary:

Commission amendments: R$ 1.095,3 million (USD 193.1 million)
Bench amendments: R$ 153.6 million (USD 27.1 million)
Executive Power discretionary spending: R$ 9.256,2 million (USD 1.631,7 million)
PAC discretionary spending: R$ 4.500 million (USD 793.3 million)

The five ministries with the largest expenditure containment are, respectively: Education, Transport, Cities, Health, and Sports. The Ministry of Defense is in the fifteenth position among the most impacted federal administration bodies, with a containment of R$ 675.7 million (USD 119.4 million).

Contingency of discretionary spending: R$ 132.2 million (USD 23.4 million)
Blockage of discretionary spending: R$ 543.5 million (USD 96.1 million)

In recent weeks, the leadership of the Ministry of Defense (MD) has been working with the Presidential Palace, the Civil House, and the Ministry of Finance to avoid potential budget losses. The Minister of Defense, José Mucio, even stated that he did not believe his department would be part of the expenditure containment effort.

The Decree is part of the economic team’s efforts to meet the fiscal result target set for 2024.

Military Spending in Brazil: Quality of Spending and Budgetary Rigidity remain challenging

Brazil is by far the largest military spender in Latin America and the Caribbean in absolute terms, according to data from the Stockholm International Peace Research Institute (SIPRI). In 2023, the country spent USD 22,887.48 million (1.1% of GDP) on defense, an increase of 11% compared to 2022.

Proposed Constitutional Amendment (PEC No. 55/2023)

A Proposed Constitutional Amendment (PEC No. 55/2023), under review in the Federal Senate, allocates a minimum annual amount of 2% of GDP for National Defense, aiming, among other things, to address the lack of resources for the strategic defense programs of Brazil’s Armed Forces.

However, according to sources consulted by Zona Militar, the PEC, while welcome, would be unable to solve two central problems: the excessive rigidity of the public budget and the quality of spending. Currently, more than 85% of Brazil’s defense budget is spent on salaries and benefits, a pattern that deviates, for example, from the reality observed among NATO member countries.