Brazil’s government put a R$12.6 billion (about US$2.5 billion) tax-debt cancellation proposal on the table Tuesday, 13 October, aimed at roughly 3.6 million micro-entrepreneurs. President Luiz Inácio Lula da Silva announced it at the Planalto presidential palace in Brasília. The timing is hard to miss: the presidential runoff is Sunday, 25 October, with 11 days remaining as of Wednesday.
The Policy
The centerpiece is a complementary bill to cancel federal tax debts owed by all MEIs, the simplified one-person businesses that pay a small fixed monthly tax slip. The bill needs an absolute majority in Congress. Congress hasn’t voted, and the government gave no date beyond asking lawmakers to act urgently.
The Ministry of Entrepreneurship says the 3.6 million MEIs owe a combined R$12.6 billion, with the debts stemming from unpaid monthly tax slips, according to Exame, a Brazilian business magazine. Finance Minister Dario Durigan defended the write-off by pointing to the collection record. National Treasury attorneys pursue 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.
That’s the government’s case: the money’s already gone. Still, the article notes that the direct cost could be smaller than the headline value because officials consider much of the debt unrecoverable. It’s a judgment call, and it comes from the same government proposing the forgiveness.
New Spending, Future Bills
The package doesn’t stop at forgiveness. A proposed one-off “Pix MEI” grant would give 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 only if Lula wins. Officials haven’t published eligibility or 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 creditors offering the largest discounts would have their loans bought first. Reports differed on the size of the bank debts, so no total is available.
Lula also asked Congress to fast-track a bill already submitted that 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. The bill’s justification estimates the higher ceiling would cost about R$8 billion (about US$1.6 billion) over three years, Exame reported. A decree confirms that MEIs need not issue invoices on sales to private individuals.
The Political Backdrop
Lula, 80, leads the Workers’ Party and is seeking a fourth term. He finished behind Flávio Bolsonaro, the conservative Liberal Party senator for Rio de Janeiro and eldest son of Jair Bolsonaro, in the first round. Lula needs votes among small entrepreneurs, a group where he polls weakly, InfoMoney reported. “We are going to help you get out of the squeeze,” he told entrepreneurs, according to the state news agency Agência Brasil. He said the measures came from demands raised by entrepreneurs.
By Tuesday evening, Brazilian outlets hadn’t reported a response from Flávio Bolsonaro.
Market Impact
Pre-election spending promises can affect how investors judge Brazil’s public finances, the real and interest rates that drive Brazilian bonds and stocks, the article said. Prediction markets, which the report stressed are bets and not polls, favor Flávio Bolsonaro. On Polymarket, bettors gave him an 87% chance and Lula 13.5% at 3:14 p.m. ET on 13 October, with US$181 million traded. Kalshi, regulated in the United States by the CFTC, showed Flávio Bolsonaro at 88% and Lula at 14% that evening. Prices can move quickly.
The article also said small businesses that clear their tax records could regain access to credit, potentially benefiting one-person suppliers such as repair shops and street vendors.
Why This Matters:
The package combines a write-off, a new grant, a bank-debt buyout and a higher revenue ceiling. The quantified pieces add up to billions of reais, announced less than two weeks before voters decide. Investors watch exactly this kind of move, because the article says pre-election spending promises can shift how they judge Brazil’s public finances, the real and the interest rates behind bonds and stocks. Officials say much of the forgiven debt was never coming back. Yet the grant and the higher ceiling carry real price tags over several years, and the grant’s rules aren’t published. Congress holds the decisive vote, and absolute-majority approval will determine whether the proposals reflect sustainable policy or campaign-season generosity.