The Brazilian developmental state changed significantly after 1985, with new rhetoric about equality, a commitment to fighting inflation, and a three-pronged policy set combining fiscal responsibility, a floating exchange rate, and inflation targeting. Yet many elements of the “old” developmental state remained intact, including a large state role, a complex monetary regime, muscular industrial policies, low economic integration, and a segmented labor market. The fight against inflation generated incentives for politicians to employ “fiscally opaque” policy instruments drawn from the tool kit of the developmental state. The fiscal imperative combined with fiscally opaque instruments contributed to the high cost of credit and low investment, driving firms to demand state succor. The fiscal imperative and the power of interest groups meant that the burden of balancing the fiscal accounts fell disproportionately on the less well-off. The ensuing demand for social spending meant that economic growth, by default, became a residual.