Celina Leão’s two main economic challenges in her next term as governor of Brazil’s Federal District are closely connected. The district government says BRB needs a multibillion-real loan to recover, and, as the bank’s controlling shareholder, the government could be responsible for repaying that debt over the medium term.

BRB’s difficulties stem from unsuccessful negotiations and transactions involving Banco Master. In March 2025, the state-owned bank announced plans to acquire 49% of Banco Master’s ordinary shares and all of its preferred shares. The proposed deal had been approved by the Federal District’s Legislative Chamber.

In late October, Federal Police indicted 15 people suspected of involvement in illegal conduct related to the case. Those named included Daniel Vorcaro, Banco Master’s former owner, and former BRB president Paulo Henrique Costa, as well as former executives of the public bank.

The immediate issue for BRB is rebuilding capital lost in transactions involving Banco Master and meeting financial safeguards set by Brazil’s central bank. The bank estimates that at least R$8.8 billion in purchased credit assets may be nonexistent, fraudulent or difficult to recover. The district government is seeking a loan of up to R$6.6 billion from the Credit Guarantee Fund to replenish BRB’s capital, but the funds have not been released. The federal government has said it cannot guarantee the operation. Leão has also said she is pursuing talks with banks in Arab countries.

Leão has said she did not take part in the negotiations and opposed the transaction. Since becoming governor, she has backed efforts to restore the bank, saying she had “taken on the BRB problem.” Her government’s plan calls for improving the bank’s financial strength, transparency and internal controls, while preserving public assets. It also outlines measures including modernizing digital services, expanding credit for small businesses and supporting infrastructure, startups and public employees.

The government’s other major economic task is balancing the Federal District’s accounts. Since taking office in March, Leão has announced spending cuts, contract reviews and other measures to curb expenses. She has described the district’s finances as having a multibillion-real hole, while officials have offered varying estimates of the imbalance and later projected an improved year-end result.

In May, the district’s economy secretary, Valdivino José de Oliveira, reported a budget deficit of R$1.9 billion for January through April, with R$13.4 billion in revenue and R$15.3 billion in committed expenditure. He said the deficit included debts recorded for 2023, 2024 and 2025, but projected a R$2 billion surplus for 2026.

In August, Leão said the district had inherited a shortfall of nearly R$5 billion. The secretary described an imbalance of about R$5.4 billion, including the recorded deficit and contracted expenses he said were not formally provided for in the budget. He cited public transport as one example: annual subsidies were estimated at R$2.2 billion, against R$1.1 billion available in the budget. The government later raised its projected 2026 surplus to R$3 billion, while the secretary said he hoped to reach as much as R$5 billion.

Leão’s government plan sets out broad commitments to fiscal responsibility, tax administration and better spending controls, but does not specify fiscal targets or detailed revenue, expenditure or investment figures. It also lacks specific implementation deadlines and indicators for those measures.

The proposed 2027 budget was prepared without a projected deficit, with spending set against estimated revenue and the district’s financial capacity. It includes allocations of R$9.3 billion for education, R$8.01 billion for health, R$2.48 billion for transport and R$1.82 billion for public safety. The economy department estimated a further R$30.32 billion from the Federal District Constitutional Fund, bringing planned resources for 2027 to about R$80.12 billion. In September, Leão warned that a possible change to the fund’s calculation could reduce the district’s 2027 budget by R$1.8 billion.

Sources: G1.