STF Forms Majority to Ease Limits on Judicial 'Penduricalhos'

BRASÍLIA — A majority of Brazil’s Supreme Court (STF) has voted to ease strict limits on extra-ceiling benefits, known as "penduricalhos," paid to judges and prosecutors. Led by votes from Ministers Luiz Fux, Dias Toffoli, and André Mendonça, the virtual trial has cleared a path for retroactive cash payouts for accumulated vacation, licensing, and judicial on-call shifts acquired before the implementation of stricter rules in March.

The decision represents a notable setback for fiscal consolidation efforts, as it allows various retroactive benefits to bypass the constitutional public sector salary cap of BRL 46,300. While the core March ruling remains largely intact—maintaining a 35% limit on ongoing monthly indemnities—the newly approved exceptions allow historical claims to be paid out in full, provided they are validated by the National Justice Council (CNJ).

For financial markets, the ruling injects unexpected pressure into Brazil's public spending outlook and fiscal accounts. Investors tracking local assets, including the Brazilian Real (USD/BRL), interest rate futures (DI1F29), and the benchmark Bovespa index (IBOV), are closely monitoring the decision as it signals persistent structural hurdles in controlling mandatory public expenditures.