Brazil: June deficit widens, debt remains on an upward trend

Research evidence excerpt

Brazil: June deficit widens, debt remains on an upward trend

J P M O R G A N Latin America Economic Research

31 July 2026

Brazil

June deficit widens, debt remains on an upward trend

• Primary deficit widened vs expectations in June, with the miss largely EM, Economic and Policy Research

explained by regional governments Mirella Sampaio

• Interest bill remains the binding constraint, bringing the nominal deficit near (55-11)mirella.sampaio@jpmorgan.com4950-3289

double digits

Vinicius Moreira

• Following a steep 1H acceleration, we still expect a meaningful deceleration (55-11) 4950-3195

in fiscal outlays over coming quarters vinicius.moreira@jpmorgan.com

Gustavo Ribeiro

A wider-than-expected deficit was driven by regional results. Brazil’s consolidated (55-11) 4950-4059

public sector posted a primary deficit of R$55.3bn in June, wider than both the gustavo.ribeiro@jpmorgan.com

market median and our forecast. The central government printed -R$47.2bn, while Banco J.P. Morgan S.A.

the negative surprise was driven mainly by regional governments (-R$6.6bn) and,

in smaller part, SOEs (-R$1.5bn). Over 12 months, the consolidated primary

deficit widened to R$157.2bn (1.19% of GDP - Figure 1). We continue to treat the

regional underperformance as potentially volatile/timing-related execution—

particularly given election-year constraints—rather than structural deterioration,

but this result weakens the near-term profile and warrants close scrutiny over

coming months.

The interest burden remains the dominant story. Accrued nominal interest reached

R$110.7bn in June (vs R$61.0bn a year earlier), with a much less favorable FX

swap contribution (a gain of R$20.9bn in June 2025 versus a loss of R$9.3bn in

June 2026). Over 12 months, interest rose to R$1,160.5bn (8.80% of GDP) and the