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On September 9, 2025, the National Congress enacted Constitutional Amendment 136, which modifies the rules governing the payment of the so-called precatórios (government IOUs).

The new model establishes that the annual spending of these entities is now to range from 1% to 5% of its Net Current Revenue (RCL), depending on the size of its outstanding debt. The key difference from the previous model is that the new one allows the application of a higher percentage toward payment of government IOUs. Before, all federated entities were limited to using only 1/12 of their Net Current Revenue.

The goal of this change is to relieve state and municipal budgets, allowing them to pay their IOUs in installments, capped at a percentage of their RCL.

If federated entities fail to fully comply, such as by delaying payments, consequences may include seizure of public accounts, suspension of voluntary transfers, and holding the responsible manager liable for acts of administrative misconduct.

Another important point is the change in the index used to adjust the amounts: the precatórios will now be updated using the IPCA index plus 2% annual simple interest, unless this exceeds the Selic rate, in which case Selic will apply. The goal is to reduce costs for public entities compared to the previous model.

The Amendment also established the Social Security Compliance Program, by means of which federated entities may settle their social security debts in up to 300 monthly installments (equivalent to 25 years). This represents a significant expansion compared to the previous model that limited installments in 60 months. Access to this program, however, will depend on proof of social security compliance by the entity, as regulated by an act to be issued by the Ministry of Social Security [1].

Another key change is the anticipation of the deadline for the enrollment of the IOUs in the Budgets: these are now only being enrolled in the next fiscal year if submitted until February 1st, no longer April 2nd.

Any who miss this deadline shall have to wait until the second subsequent fiscal year, with no late-payment interest accruing until December 31st of the following year.

At the federal government level, starting in 2026, precatórios – including small claims IOUs – will be out of the primary expenditure ceiling. In 2026 alone, approximately BRL 70 billion in IOUs are expected, according to Agência Câmara de Notícias [2]. From 2027 onward, part of this (10% per year) will again be counted within the fiscal targets of the Budget Guidelines Act (LDO), in line with the new fiscal framework (Complementary Law 200 of 2023). This arrangement will give the federal government immediate flexibility to meet its 2026 target (a primary result of R$34 billion, or 0.25% of the GDP).

Another key point is the disconnection from the federated entities revenues: until 2026, municipalities can freely use up to 50% of their revenues from taxes, fees, fines, and contributions; from 2027 to 2032, this percentage will recede to 30%. At the federal level, between 2025 and 2030, up to 25% of the budget surplus of public funds may be allocated to climate actions and strategic projects. If unused, these funds will gradually return to their original sources starting in 2031.

[1] States and Municipalities shall have longer installment plans to pay their social security debt. Available in Portuguese on: <https://www.gov.br/previdencia/pt-br/noticias/2025/setembro/estados-e-municipios-terao-prazo-maior-para-parcelar-dividas-previdenciarias>. Accessed on: 11 sep 2025.

[2] NEWS. National Congress enacts constitutional amendment with new rules for the payment of government IOUs – News. Available in Portuguese at: <https://www.camara.leg.br/noticias/1198404-congresso-nacional-promulga-emenda-constitucional-com-novas-regras-sobre-pagamento-de-precatorios/>. Accessed on: 11 sep 2025