Brazil currently faces many challenges to manage its public finances, although this is not always so clear to everyone. That is why FGV’s Department of Public Policy Analysis (DAPP) released an unprecedented tool last week to monitor the fiscal situation of the Brazilian federal government: the Fiscal Compass.

The platform is another initiative from DAPP’s Budgetary Transparency area, containing official public data translated into a clear and interactive language. The compass metaphor is based on an understanding that the federal government’s fiscal management goes through a particular path, which sets its course — the so-called fiscal target. Therefore, the Fiscal Compass is an instrument that aids in knowing whether the government is on the right track to reach this target.

Otherwise, the government’s course of action must be adjusted back into its original trajectory. Based on the fiscal target, the government adjusts the overall limit of primary expenditure according to collection results. The government can also tweak tax collection or choose to adjust each year’s specific target.

“The Fiscal Compass is an initiative that reflects DAPP’s ongoing effort to develop analysis and data visualization tools that make it easier to understand and monitor the allocation of public resources. With this new platform, our goal is to clearly outline the Brazilian federal government’s path towards the fiscal target, which is a major challenge amidst the current crisis”, said DAPP Director Marco Aurelio Ruediger.

How does it work?

The tool’s navigation is driven by a story to be told in chronological order. Every time the government issues a financial programming decree, a picture is taken of the collection behavior before that moment, indicating the government’s reactions, which can be seen based on the historical series.

The rest of the screen reacts based on this event: figures regarding end-of-year prospects are shown above (revenue, expenditure and results), whose behavior affects the compass’ movement. Every time the compass moves, there are indications of a mismatch based on the fiscal target’s forecast, which may or may not be adjusted later on, either by raising taxes, reducing expenditure, or changing the target.

“Right now, when the accounts are tight and we need to get into a recovery cycle, the fiscal choices are always very difficult. The idea behind this tool is to make the process, and the context in which these choices are made, more transparent. We believe that the population should not only be notified of public decisions, but should also be aware of their reasons”, said DAPP Researcher Andressa Falconiery.

Go to this website to check out the Fiscal Compass, available in Portuguese.