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Brazil’s Supreme Court Allows Emergency Drought and Wildfire Spending Outside Fiscal Targets

Brazil's Supreme Court has approved the government’s request to exclude spending related to droughts and wildfires in the Amazon and Pantanal regions from this year's fiscal target. This ruling enables the government to take swift action, including submitting an executive order to Congress for additional emergency measures, as the country deals with its most severe drought on record.

Justice Flavio Dino, who made the ruling, also allowed the government to skip a mandatory waiting period for hiring temporary firefighters and ordered that resources from a federal police fund be redirected to prioritize investigations into wildfires.

Brazil is currently experiencing its worst drought since 1950, as reported by the National Center for Monitoring and Early Warning of Natural Disasters (Cemaden). The drought has been intensified by a weak rainy season, increasing atmospheric temperatures, and deforestation, where forested areas have been cleared for pastureland. This has led to record wildfires across multiple regions, while low water levels in the Amazon have disrupted both local communities and crucial agricultural shipments from major grain-producing states such as Mato Grosso.

The government has already allocated 27 billion reais ($4.85 billion) in spending for unprecedented flooding in Rio Grande do Sul earlier this year. Like the current drought and wildfire spending, these funds have been exempted from the country's fiscal targets, highlighting the increasing financial pressure caused by climate-related disasters. However, despite being exempt from the fiscal cap, these expenses will still contribute to the country's already significant public debt, which is high compared to other emerging markets.