This paper studies the determinants of political budget cycles in the Brazilian federal states. We propose a methodology to decompose the political cycles into one part that is due to the opportunistic behavior and another one that is due to the signaling activity of incumbent governors. The goal is to investigate whether voters are able to: (1) capture the competence signals sent by governors; and (2) identify and punish opportunistic politicians. The results show that the Brazilian electorate rewards the opportunistic part of the cycles in both revenue and spending, although this effect has been decreasing over the elections.
