Economic policy

Lula hints at economic policy reversal if elected president

Brazilian presidential favorite Luiz Inácio Lula da Silva gave a first look at his economic policy.

Elections are scheduled for October, and although Lula has yet to formally launch his candidacy, he has asked former finance minister Guido Mantega (pictured) to write an op-ed for Folha de S. Paulo, according to the newspaper.

“Neoliberal governments have reversed some of the social and economic advances. [previous Michel] The Temer administration spearheaded the labor reform that reduced entitlements and wages, and approved the spending cap law, which produced many distortions in budget management. Tax management of Temer and [Jair] The Bolsonaro governments have been a disaster which since 2016 has only accumulated primary deficits,” wrote Mantega, in office from 2006 to 2014.

“To deal with this difficult situation, the democratic forces will have to draw up an economic and social development program for the reconstruction of the country. The government must coordinate an ambitious public and private investment plan to expand infrastructure and increase productivity, generating many jobs. ,” he added.

During his two terms, Lula focused on social programs and public investment, largely supported by the commodity super cycle. But Lula’s successor, Dilma Rousseff, in office from 2011 to 2016, failed to adjust her economic policy at the end of the supercycle.

Subsequent Temer and Bolsonaro administrations implemented changes to strengthen the private sector and attract investment, including in infrastructure, while reducing the state’s share of the economy.

But Mantega suggested Lula would change that approach.

While Bolsonaro has been heavily criticized for his handling of the pandemic, his failure to control inflation and his uncontrolled deforestation, investors have seen a positive focus on the private sector.

“Economic agents are very concerned about the reversal of some measures that were positive for the economy, such as the labor reform that has significantly reduced costs for businesses,” Alex Agostini, chief economist at BNamericas, told BNamericas. local rating agency Austin Rating.

While Bolsonaro was elected on an anti-corruption platform, a key issue in the wake of the Lava Jato inquiry, economic aspects are expected to dominate the campaign ahead.

“The anti-corruption narrative has lost much of its appeal. After the effects of the pandemic on the economy, voters are now more concerned about what candidates will do in the economy. electoral debate tend to be inflation and unemployment,” Luciano Rostagno, chief strategist for Latin America at Banco Mizuho, ​​told BNamericas.

Lula was found guilty of corruption. Despite flimsy evidence, former Lava Jato prosecutor Sergio Moro, who also served as justice minister and is now running as a centrist candidate, sentenced Lula to prison. After appeals and a complex legal battle, he served 580 days.

TAX REFORM

In his op-ed, Mantega also promoted tax reform to lower taxes on lower incomes and increase them on higher ones.

“Tax reform that simplifies federal, state and municipal taxes is essential. It is also important to reduce taxation of the poorest, by increasing taxes on the income and wealth of the richest 1%, in order to reverse the regressive character of the Brazilian tax structure,” Mantega wrote.

“What is at stake in the upcoming elections is whether we will continue the disastrous economic policies of the Bolsonaro government and other neoliberal candidates, or whether we will return to the path of social development towards the welfare state,” he added. .