Critics of Lula’s economic plans mount as Brazilian markets slump

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Criticism of Brazilian President Luiz Inacio Lula da Silva’s economic policies intensified on Wednesday, with analysts and a major newspaper criticizing ministers after local markets collapsed in the leftist’s first two days in office.

Finance Minister Fernando Haddad, a Lula loyalist who failed to run for president as the left-wing Workers’ Party candidate in 2018, has been one of the main targets, with his local newspaper O Estado de S. Paulo calling him of “Minister of Decoration” on Wednesday. Haddad, a former mayor of Sao Paulo, took office promising to restore public accounts and with the challenge of presenting a credible fiscal framework after Congress passed a giant Lula social spending package.

Lula has said eradicating poverty and hunger will be the “trademark” of his government, raising fears of rampant spending and a lack of fiscal discipline. Markets reacted badly to Haddad’s early days in office, particularly after Lula ordered a budget extension of a fuel tax exemption that Haddad had publicly opposed.

“Haddad learned as soon as he took office that he will be a decorative figure, a sort of hard worker for President Lula,” the conservative daily said in an editorial. The paper, which has been quick to criticize far-right former president Jair Bolsonaro, added that Haddad had been “discredited from day one” and should learn to say “no” to Lula.

Citi analysts said Tuesday that while Lula and Haddad’s first speeches in power were consistent with their base case scenario, the two appeared less pragmatic and fiscally responsible than initially thought. “In general, they have given the impression of a government that is tone deaf – at least when it comes to the kinds of tones that financial markets want to hear,” BMO Capital Markets FX strategists told clients, adding that their comments could lead to a situation in which “inflation will reassert itself and rate cuts will be ignored”.

The Brazilian real has fallen 3.8% against the dollar in the past three sessions, hitting its lowest level since July 2021, while the benchmark Bovespa stock index has fallen around 5% so far. This year. On Tuesday, the markets were again shaken by the remarks of the Ministers of Social Security and Labor of Lula.

Minister Carlos Lupi baffled the market with his comments that the country’s social security system was not in deficit, despite Treasury figures showing a cumulative deficit from January to November of 267.9 billion reais (49 billion). dollars). This was compounded when he said Lula’s government should review the investor-friendly pension reform endorsed by Bolsonaro’s administration.

Labor Minister Luiz Marinho, critical of a 2017 labor reform approved under former President Michel Temer, said the new administration would prioritize regulating work relationships established through phone apps mobiles and digital platforms. Their remarks showed that “the government remains on the path of reversing the liberal reforms adopted by the last two presidents,” said analysts from Guide Investimentos.

($1 = 5.4797 reais)

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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