About 3.6 million of Brazil's smallest business owners owe the federal government a combined R$12.6 billion (about US$2.5 billion). On Tuesday, 13 October, President Luiz Inácio Lula da Silva proposed wiping out that debt. He unveiled the package at the Planalto presidential palace in Brasília, with the presidential runoff set for Sunday, 25 October.
The central proposal is a complementary bill that would cancel federal tax debts owed by all MEIs, or microempreendedor individual businesses. MEI is a simplified tax status for one-person businesses that pay a small fixed monthly tax slip. According to Exame, a Brazilian business magazine, the Ministry of Entrepreneurship says the debts come from unpaid monthly slips. The bill needs an absolute majority in Congress.
Who Is Affected
These aren't large corporations. They're one-person operations: the repair shop, the street vendor, the supplier working alone. For many, an unpaid slip became a debt that kept them locked out of the formal credit system.
Finance Minister Dario Durigan said National Treasury attorneys collect the debt, often through court action. "The conclusion of the technical staff is that this is debt that is largely unrecoverable," he said, according to Exame. The article said clearing their tax records could help these small businesses regain access to credit, potentially benefiting the one-person suppliers who make up much of the group.
Lula told entrepreneurs, "We are going to help you get out of the squeeze," according to the state news agency Agência Brasil. He said entrepreneurs themselves had raised the demands behind the measures, which the government would turn into bills and decrees.
The Policy Gap
A second proposal, a one-off "Pix MEI" grant, would provide up to R$5,000 (about US$1,000) per business for equipment and improvements. "It is not credit," Entrepreneurship Minister Paulo Henrique Rodrigues Pereira said at the ceremony. Planning Minister Bruno Moretti put the cost at R$5 billion (about US$1.0 billion) over four years, or about R$1.25 billion (about US$250 million) a year from 2027. Electoral law bars creating the program in 2026, so it could start in 2027 if Lula wins. Officials haven't published eligibility and verification rules.
The government also plans to use its Desenrola 3.0 program to buy MEI debts from banks, requiring discounts of at least 90%. Durigan said the government would buy loans from creditors offering the largest discounts first. Reports differed on the size of the bank debts, so no total is given here.
Lula also asked Congress to fast-track a bill already submitted. It would raise the annual MEI revenue ceiling from R$81,000 (about US$16,200) to R$110,000 (about US$22,000) in 2027 and R$140,000 (about US$27,900) in 2028, according to Agência Brasil. Exame reported that the bill's justification estimates the higher ceiling would cost about R$8 billion (about US$1.6 billion) over three years. A fifth measure, a decree, confirms that MEIs need not issue invoices on sales to private individuals.
Politics and Markets
Lula, 80, leads the Workers' Party (PT) and is seeking a fourth term. He finished behind Flávio Bolsonaro, a conservative Liberal Party (PL) senator for Rio de Janeiro and the eldest son of Jair Bolsonaro, in the first round. Small entrepreneurs are a group where Lula polls weakly, InfoMoney reported. By Tuesday evening, Brazilian outlets hadn't reported any response from Flávio Bolsonaro to the package.
The article said pre-election spending promises can affect investors' views of Brazil's public finances, the real and the interest rates that drive Brazilian bonds and stocks. But it also said the direct cost of the forgiveness could be smaller than the headline figure, since the government considers much of the debt unrecoverable.
Prediction markets heavily favor Flávio Bolsonaro. On Polymarket, bettors gave him 86.2% and Lula 13.5%, with US$181 million traded. Kalshi showed Flávio Bolsonaro at 88% and Lula at 14% as of 13 October. The report described these figures as bets, not polls, and said prices could move quickly.
Congress hasn't voted on the debt-relief bill, and the government gave no date beyond asking for urgency. Debt forgiveness and the higher revenue ceiling both require congressional approval.
Why This Matters: The package puts a question to Brazil's lawmakers: who should the state pursue, and who should it release? Treasury attorneys are pursuing millions of one-person businesses over debts the government's own technical staff calls largely unrecoverable. That enforcement keeps small owners shut out of credit. Cancelling the debt, if Congress agrees, could let them rebuild. The timing, 12 days before a runoff in which Lula trails, invites scrutiny, while unpublished rules for the Pix MEI grant leave open how it would reach the people it targets. Raising the revenue ceiling would also widen the formal safety net around self-employed workers. Whether any of it becomes law depends on a congressional majority that hasn't yet voted.