Brazil Lawmakers Back Small-Firm Debt Relief

BRAZIL · ECONOMY

Brazil’s lower house approved debt relief on Wednesday 14 October for micro-entrepreneurs, the country’s smallest registered businesses. The Chamber of Deputies voted 461 to 4 to forgive their overdue federal debts and lift a revenue cap unchanged since 2018.

President Luiz Inácio Lula da Silva’s government sent the plan, which passed 11 days before his 25 October runoff against conservative senator Flávio Bolsonaro. For US investors who hold Brazilian bonds or the real, it is one more pre-election measure with a price tag for the federal budget.

What the Lower House Approved

The Chamber of Deputies is the lower house of Brazil’s Congress, with 513 members. It passed a text by Rubens Pereira Júnior, a deputy from Lula’s left-wing Workers’ Party (PT) for the northeastern state of Maranhão.

His text merged two government bills on the MEI, short for microempreendedor individual, or individual micro-entrepreneur. The MEI lets one-person businesses register, issue invoices and pay a single small monthly fee for tax and social security.

Current rules let an MEI earn at most R$81,000 (about US$16,100) a year, at about 5.04 reais to the dollar on 14 October 2026. That ceiling has not changed since 2018, and the bill lifts it to R$110,000 (about US$21,800) in 2027 and R$140,000 (about US$27,800) from 2028.

“Today the MEI sometimes turns down a contract so as not to go over the limit,” Pereira Júnior said. The bill also lets a micro-entrepreneur hire two employees instead of one, if they earn the minimum wage or their trade’s wage floor.

The higher cap was first sent to Congress in June, while the debt pardon arrived only on Tuesday 13 October. Pereira Júnior folded both into one text, which the lower house passed the next day.

Who Gets the Debt Relief

The bill fully forgives federal debts that micro-entrepreneurs ran up until 13 October 2026, covering unpaid social security contributions plus interest and fines. On the floor, Pereira Júnior widened it to debts not yet entered in the government’s register of overdue debts.

The government had put the registered debts at R$12.6 billion (about US$2.5 billion), owed by about 3.6 million micro-entrepreneurs. Entrepreneurship Minister Paulo Henrique Rodrigues Pereira said the wider text covers about R$3 billion (about US$596 million) more, Folha de S.Paulo reported.

The debt relief would apply from 1 January 2027 and comes with conditions. A beneficiary must pay every monthly contribution due in the first six months after the law is published, or the pardon is cancelled.

Micro-entrepreneurs who are fighting the government in court must also drop those lawsuits. They will not have to pay the other side’s legal fees when the cases close.

The government puts the cost of the original pardon at R$1.1 billion (about US$218 million) in 2027 and R$1 billion (about US$199 million) in 2028. It puts the 2029 cost at R$909 million (about US$180 million), or roughly R$3 billion (about US$596 million) over three years.

Why the Timing Matters

The debt relief was the latest offer Lula’s campaign made to small business owners this week, reported g1, the Globo group’s news site. Lula, 80, is seeking a fourth term against Flávio Bolsonaro, the eldest son of former president Jair Bolsonaro.

Opposition deputies still voted for the bill but attacked its timing. Adriana Ventura of Novo, a small pro-market party, called it “regrettable” that the change came “as an electioneering measure,” g1 reported.

Only four deputies voted no, among them Aécio Neves of the centre-right Brazilian Social Democracy Party, who lost the 2014 presidential runoff. Kim Kataguiri, an opposition deputy from São Paulo, had failed to pull the bill from the agenda, losing that vote 387 to 11.

The same day, Brazil’s Senate voted 75 to 1 to end the six-day working week. Hugo Motta, the Chamber’s centre-right president, said small firms needed the MEI changes before that switch begins 60 days after enactment.

Lula announced the MEI debt relief on Tuesday 13 October, together with grants of up to R$5,000 (about US$993) per business. The grant plan is only due to go to Congress after the election, g1 reported.

What Prediction Markets Say

On Polymarket, an online prediction market, bettors give Flávio Bolsonaro an 83% chance of winning and Lula 16.5% (15 October, 3:56 a.m. ET). Over the previous 24 hours Flávio’s price fell about 3 points and Lula’s rose 3, with about US$182 million bet on the market.

What It Means for You

Foreigners who freelance in Brazil can read how the scheme works in a guide to self-employment for foreigners in Brazil. If the Senate agrees, a higher cap lets such one-person firms earn more before moving into a costlier tax regime.

For investors in Brazilian bonds and the real, the bill is another cost the next government must fund. The government puts the revenue lost to the higher cap at R$1.57 billion (about US$312 million) in 2027.

That figure rises to R$3.15 billion (about US$626 million) in 2028 and R$3.38 billion (about US$671 million) in 2029. The text also exempts the pardon from the tax-waiver rules of Brazil’s Fiscal Responsibility Law, the 2000 statute that disciplines public spending.

What Is Not Known

It is not known when the Senate will vote on the bill, or whether senators will change the text. Any change would send it back to the Chamber of Deputies before Lula could sign it.

It is also not known how many indebted micro-entrepreneurs will keep up the six months of payments the debt relief requires. The final cost of widening the pardon to debts outside the register is still open.

More: Brazil news in English, every day from The Rio Times.

Frequently Asked Questions

What is an MEI in Brazil?

MEI stands for microempreendedor individual, or individual micro-entrepreneur, Brazil’s simplest business registration. It lets one-person firms issue invoices and pay one small monthly fee for tax and social security.

How much can an MEI earn under the new bill?

The cap would rise from R$81,000 (about US$16,100) a year to R$110,000 (about US$21,800) in 2027 and R$140,000 (about US$27,800) in 2028. The bill still needs Senate approval before the new limits take effect.

Which debts would be forgiven?

The bill forgives federal debts that micro-entrepreneurs ran up until 13 October 2026, whether or not they are already registered as overdue. Beneficiaries must keep paying their monthly contributions for six months, or they lose the debt relief.

When would the changes take effect?

If the Senate passes the bill and Lula signs it, the debt relief and the R$110,000 (about US$21,800) cap would apply from 1 January 2027. The R$140,000 (about US$27,800) cap would follow on 1 January 2028.

Is the bill linked to the runoff?

Lula’s government sent the debt relief plan on Tuesday 13 October, and the lower house passed it 11 days before the 25 October runoff. Most opposition deputies voted for it, though some called the timing electioneering.

Sources: Chamber of Deputies, PLP 186/2026 final text sent to the Senate (signed by Hugo Motta), 14 October 2026; Chamber of Deputies, PLP 186/2026 tracking and vote record (461 to 4), 14 October 2026; Agência Câmara, Câmara aprova novo limite de enquadramento para microempreendedor individual e inclui perdão de dívidas, 14 October 2026; Agência Brasil, Câmara aprova aumento no limite de receita bruta do MEI, 14 October 2026; g1, Câmara aprova projeto que amplia limite do MEI e perdoa dívidas de inadimplentes, 14 October 2026; Folha de S.Paulo, House passes MEI cap rise and debt pardon in a win for Lula (Isadora Albernaz, Raphael Di Cunto, Guilherme Pimenta), 14 October 2026; CartaCapital, Quem são os 4 deputados que votaram contra o aumento do teto do MEI, 14 October 2026; g1, Government’s cost estimate for the MEI debt pardon, 13 October 2026.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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