Fiscal Policy and Public Debt in Mercosur Countries: An analysis for the period 2000-2024

Abstract

This paper analyzes debt dynamics in MERCOSUR countries from 2000 to 2024, identifying two distinct trajectories. The first period (until 2010) showed improvement in fiscal indicators and debt stabilization, supported by favorable external conditions and commodity prices. Countries implemented fiscal rules to control spending and debt. The second period (from 2011) faced multiple challenges, including the 2008/2009 financial crisis, Eurozone crisis, and COVID-19 pandemic, leading to increased uncertainty, inflation, and interest rates. This adversely affected growth and increased indebtedness in MERCOSUR members, requiring fiscal rules reformulation. The research reveals that these countries lack effective mechanisms to address cyclical fiscal challenges and structural problems, including emerging issues like climate change, which requires substantial investment for adaptation and mitigation.