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One thing is certain, if Lula had talked less nonsense during this period, Brazil would be much better off!
Nº 15 – Plowing the truth with Prof. Pilão – 12/04/2023
Yesterday, 04/10/2023, the new Lula Government celebrated the first 100 days in office without having much to celebrate.
In the speeches of Lula and his ministers, a reheated Brazil was shown, programs already known, implemented in the Bolsonaro Government, or in their own previous mandates, were shown, all with a good makeover and a new name, with the slogan “Brazil is back” being widely repeated.
Although announcing the reheated version was the government’s way of showing service, there is no denying that some new actions have taken place and, even if we do not agree with all of them, they were proposed, but even so, it is very little for someone who said that the country was a devastated land…
The following measures stand out: measures aimed at the indigenous population, especially the Yanomami; rapprochement with governors and mayors; the reactivation of the Amazon Fund, which has not yet resulted in ebk.go.ke any inflow of resources, but there are promises; increased monitoring of illegal mining; the readjustment of scholarships and research grants by 200%, the salaries of basic education teachers by 15% and of civil servants in general by 9%; the reservation of 30% of positions of trust in the federal administration for black people; the Menstrual Health Protection and Promotion Program; the Bill that equalizes salaries between men and women with the same function; and the publication of the law that equates racial injury with the crime of racism.
Of course, I may have forgotten one or two actions, but, broadly speaking, this is what’s new, since the main programs announced already existed, such as: the Bolsa Família of R$600.00, the new name given to Bolsonaro’s Auxílio Brasil Program, boosted by R$150.00 per child and R$50.00 per adolescent; the return of the National Council for Food and Nutritional Security; the https://anatolianhouses.com.tr/ resumption of the contested Mais Médicos program; the return of Minha Casa, Minha Vida, in place of Bolsonaro’s Casa Verde e Amarela; the relaunch of the National Public Security with Citizenship Program; and, in foreign policy, despite the contested rapprochement with the Venezuelan and Nicaraguan dictatorships, we have indeed made some progress.
During these 100 days, the economy was not exactly a priority for Lula, who increased his government’s spending by R$112.1 billion for 2023. Of course, this was absolutely expected, since in his campaign he said he would put the “poor in the Budget”, which means we can complain about anything, except electoral fraud, he said it and is doing it.
It is important to emphasize that this was only possible due to the PEC (Spending Cap Breaker), which allowed Lula to spend up to R$170 billion above the ceiling – a reckless move, a true blank check, for the government to boost its popularity, which allowed the spending of R$112.1 billion, which was distributed as follows:
Please note that these R$112.1 billion do not include new expenses already contracted, such as those necessary to maintain the 37 ministries, 14 more, with all their necessary physical and organizational infrastructure.
It is worth remembering that coddling voters at this first moment was easy, the transition PEC allowed it, the problem now is finding a way to govern, since up until now we still do not have any government plan.
In this scenario, the spree of job distribution stands out; the division of ministries; the appointment of politicians to company boards, violating the law on state-owned companies; the release of parliamentary amendments to obtain support in Congress and try to prevent the CPMI of the fateful January 8; the filling of second and third-tier positions with cronies; the appointment of political colleagues to state-owned company boards; repeating the old PT practice, which we have already proven and which has the bitter taste of facilitating corruption.
Evidently, the market follows everything and “prices in” every action and every speech made by the government. In fact, there is no shortage of speeches aimed at denigrating the previous government, speaking badly of the Central Bank, discrediting agribusiness and businesspeople, expelling informal workers from the market and tarnishing the image of many parliamentarians.
All of these statements are directly reflected in the market, as they increase the risk, and therefore, it becomes more expensive to continue financing the government.
Lula is always complaining about the Central Bank, asking for a reduction in interest rates, but how can he do that if he himself never stops talking nonsense, such as minimizing the attack on Senator Sérgio Moro? By releasing funds in the same way as the “secret budget”, which is unconstitutional; by fighting with market forces, fighting with the president of the Central Bank and inflaming his allies, dividing Brazil even more.
All of this has a direct impact on the market. If it weren’t for that, we would certainly already be seeing interest rates drop and credit become cheaper. It would be a natural consequence of the blessed legacy of Bolsonaro and Paulo Guedes .
Yes, a blessed legacy , because they handed over Brazil ready to take off and fly. Of course, the social agenda was completely different, so that would have to be reversed, but the economic agenda was not, it was absolutely ready!
Proof of this are the inflation figures for March/2023 that came out today, the IPCA was 0.71%, the lowest since January/2021, with accumulated inflation in 12 months of 4.65%, a result that could open space for the desired drop in interest rates at the next COPOM meeting. See below the consistent curve of the drop in inflation over the last year, according to BACEN:
Since, at least so far, the new government has not done anything new in the economy, this solid result of falling inflation can only be credited to the Bolsonaro government and its successful fiscal and tax policies and, mainly, to Roberto Campos Neto, elected as the best central banker in Latin America in 2022. In fact, it is he who Lula keeps complaining about…
The drop in inflation was enough to send the market into a frenzy, with the stock market rising more than 4% today, a relief after suffering successive trading sessions of decline. In the midst of all this, Minister Hadad is trying at all costs to finalize the new “fiscal framework” which, as of yet, does not have a definitive text.
So far, all we know comes from a PowerPoint presentation the minister used to present to party leaders. The only thing that is clear, I repeat, is that the government is asking Congress for authorization to increase its spending by at least 0.6% per year above inflation, if there is no growth in revenue that year. If revenue increases, spending could increase by up to 70% of it, limiting it to 2.5% above inflation.
We’ll just have to wait and see, as everything indicates that tax increases are coming, as the GDP does not appear to be large enough to cover the new expenses created by the new Lula government.
As for Congress, despite spending a lot of money to gain support, Lula still does not have a secure majority to approve his agenda. With the impasse between Lira and Pacheco, no major proposal has been voted on since he took office. It has been 100 days without a single government bill being approved in Congress.
It is estimated that the Lula government today does not yet have the majority necessary to approve constitutional amendments. In the Chamber, there are around 257 allied deputies, coming from PT, Podemos, PDT, PSB, PSOL/Rede, Avante, PSC, Solidariedade, Pros, in addition to part of União Brasil, MDB and PSD, therefore, it lacks 54 votes to obtain the approval of a PEC.
In the Senate, the situation is not much different. Of the 81 elected senators, around 49 belong to Lula’s allied base, while the opposition has at least 30 senators, which is enough for the minority to request the opening of a CPI. The government base is made up of the same parties as in the Chamber.
Today Lula traveled to China accompanied by eight ministers, five governors, eight senators, 19 deputies, and an unspecified group of businessmen. This is an important trip. China is Brazil’s main trading partner, representing more than 25% of our foreign trade. This is Lula’s fourth trip abroad. It is expected to yield good results. We need…
For now, we can only thank former minister Paulo Guedes, and especially Mr. Roberto Campos Neto, president of the Central Bank, for seeing Brazilian inflation return to within the limits of the inflation target after years, since today’s 4.65% is lower than the upper limit of 4.75%.
