Brazil's Ministry of Finance intends to change legislation or the constitution by the end of the year to pursue the center of the 2026 fiscal target. The statement brings yet another regulatory shift in public accounts onto the financial radar and directly impacts yield curve projections in Brazil.
What Does the Government Want to Change in the Fiscal Target?
The intent is to promote legal or constitutional changes still in 2026 to hit the center of the target. In an interview with Broadcast (Grupo Estado's real-time news system) on Monday, October 26, acting Finance Minister Dario Durigan stated that the executive branch will not limit itself to complying with the tolerance margin of the fiscal framework, but will actively pursue the exact center set for public accounts.
“We are going to change the law or, if necessary, the constitution to pursue the center of the fiscal target this year.” Dario Durigan, in an interview with Broadcast (10/26/2026)
This signal shifts the focus of action for the Treasury and Congress. Under the current framework, fiscal targets have upper and lower tolerance bands. When the financial market projects the country's primary result, it routinely assumes the government will be satisfied if it delivers a result at the lower limit of the band. By indicating it will make legislative changes to target the exact center of the goal, the Ministry of Finance seeks to reinforce the perception of fiscal commitment among economic agents.
Why Does the Government Need to Amend the Law or the Constitution?
The need for change arises because the current budget has structural locks on mandatory spending. To reach the target center without paralyzing public administration, economic management needs legal backing to cut, freeze, or reindex expenses that currently have rigid constitutional or legal protection.
Move away from the tolerance margin and deliver a neutral or positive primary result at the stipulated center.
Submission of a Bill or Constitutional Amendment Proposal during the final quarter of the year.
Swift approval in an election year and negotiation of friction points in earmarked spending.
There are two ways the market views this promise. On one hand, the commitment to changing laws to pursue the center of the target demonstrates a willingness to deliver more balanced accounts. On the other hand, frequent changes to the legal framework raise concerns about creative accounting or future rule-loosening if numbers do not add up by the end of the fiscal year.
How Does This Fiscal Promise Move the Selic Rate and Fixed Income?
The credibility of the announcement will dictate the direction of the yield curve over the coming months. The Selic rate and long-term government bond yields (such as Tesouro IPCA+ and fixed-rate bonds) depend not only on current inflation, but on confidence in public debt sustainability. If the financial market believes the legal change will bring genuine fiscal consolidation, future interest rates tend to fall.
If legal changes permanently curb spending, the yield curve flattens, benefiting long-term fixed income assets and equity-backed real estate investment funds (FIIs) through unit appreciation.
If the market interprets the change merely as accounting juggling to close the year, risk premiums rise, pushing the Selic rate higher and pulling down risk assets.
The Central Bank is closely monitoring the Ministry of Finance's guidelines. In its most recent minutes, Copom made it clear that fiscal uncertainty is one of the main factors preventing relief in the benchmark interest rate. Without a transparent fiscal horizon, the Central Bank is forced to keep interest rates higher for longer to anchor inflation expectations.
What Does This Mean for the Individual Investor?
Investors should prepare for heightened volatility across fixed income and equities. Statements of intent from the Ministry of Finance cause immediate reactions in asset prices traded on the secondary market. The practical impact varies by asset class in your portfolio:
Tesouro Direto and Fixed Income: Longer-term IPCA+-linked and fixed-rate bonds will experience sharp swings due to mark-to-market pricing. Periods of uncertainty offer attractive coupon rates, but require stomach to hold until maturity.
Real Estate Investment Funds (FIIs): Equity-backed FIIs rely on falling future interest rates to appreciate. Any fiscal noise stalls the recovery of urban and logistics real estate funds, while credit-backed FIIs (CRIs) remain protected with high yields amid elevated interest rates.
Equities on the B3: Domestic consumption-focused and heavily indebted companies suffer from delays in the interest rate cut cycle, whereas exporters and steady dividend payers offer greater resilience in the current macroeconomic environment.
What to Watch From Now On?
Dario Durigan's announcement needs to turn into concrete text in the National Congress. To assess whether the measure will bear real fruit for your investments, monitor the evolution of the topic through the following triggers:
Legal Text Presentation — Observe whether the government will submit a Complementary Bill or a Constitutional Amendment Proposal, and which expenses will be affected.
Congressional Reception — Gauge the willingness of the leaders of the Chamber of Deputies and the Senate to schedule and approve the matter before legislative activities wrap up for the year.
Focus Survey and Future Interest Rate Reaction — Track whether market analysts revise downward their primary deficit projections and the IPCA trajectory for coming years.
Investor Verdict
The Ministry of Finance's promise to change the law or the constitution to target the center of the fiscal goal signals intent, but is not yet a guarantee of execution. Until the final text is introduced and voted on by Congress, the outlook for fixed income calls for caution regarding long-term bonds exposed to mark-to-market risk. The current environment favors floating-rate positions (such as Tesouro Selic and daily-liquidity CDs) for liquidity, while maintaining a long-term focus on inflation-linked bonds (Tesouro IPCA+).
