Abstract

This article analyzes the fiscal sustainability of the Brazilian economy in recent decades. It evaluates the solvency of public debt in Brazil through the cointegration tests that showed a long-term relationship between public revenue and expenditure in the period of 1975 (I) to 2010 (II). The results show a solvency ratio between the Revenue / GDP ratio and expense / GDP ratio.  That is, for each $ 1.00 spent per unit of product, one gets a return of $ 1, 0078 of revenue collected per unit of product. On the other hand, the total revenue and total expenditure (deflated by the IGP-DI) do not pass through the solvency test if revenue from seigniorage is not included, that is, for each $ 1.00 spent deflated by the IGP-DI, one gets a return of $ 0, 9922 of revenue collected deflated by the IGP-DI, a value less than $ 1.00. Furthermore, fiscal sustainability tests for the period 1964 to 2008 reveal two important results: i) an increase in debt/capital stock ratio negatively affects the growth rate of capital stock and also negatively affects the growth rate of the product; ii) fiscal policy is weakly sustainable which could lead to a possible problem of insolvency.