Rising public spending and interest rate increases will likely exacerbate Brazil’s long-standing economic problems , leading to stagflation, growing inequality and greater vulnerability to shocks. On Oct. 21, Brazilian President Jair Bolsonaro announced that his government would move forward with a new cash-transfer program, called Auxilio Brasil, which will likely put Brasilia over the constitutionally-mandated spending cap. Bolsonaro’s allies in Congress are likely to push for a temporary rise of the constitutional spending limit and spacing out a series of recently court-ordered outlays, which currently total $15 million. Bolsonaro and his allies hope the Auxilio Brasil program will bolster domestic support ahead of the October 2022 general election. The spending cap was written into Brazil’s constitution in 2016 to usher in a period of fiscal responsibility following several years of high spending. The cap ensures that the fiscal spending is the same as the previous year, adjusted for inflation.