Lula Evaluates Economic Team Amid Fiscal Policy Skepticism
President Lula tests potential ministers while facing external doubt over fiscal adjustment plans.
1Fiscal Adjustment Strategy
The Brazilian government is currently negotiating a supplementary bill, or PLP, aimed at fiscal adjustment. These measures target up to 80 billion reais in savings for 2027. Senator Jaques Wagner presented the proposal on Wednesday, November 11, following technical drafting by the current economic team led by Bruno Moretti.
2Internal Ministerial Auditions
President Lula is subjecting current ministers Dario Durigan and Bruno Moretti to a rigorous selection process. Before departing for Asia, Lula organized a vetting session where these officials were questioned by trusted economic advisors, including Guido Mantega, Aloizio Mercadante, and Fernando Haddad, to determine their suitability for the next term.
3Competing Economic Visions
Disagreements persist within the economic team regarding the depth of fiscal cuts. While Dario Durigan advocated for a more robust adjustment via a constitutional amendment, the current proposal reflects Bruno Moretti's more moderate approach. Moretti is currently considered a favorite to retain his position in the Planning and Budget Ministry.
4Market and Political Outlook
Former São Paulo governor João Doria expressed public skepticism regarding the administration's fiscal management. Speaking at the 9th Brasília Summit on November 11, Doria stated he lacks confidence in the government's ability to achieve fiscal balance, citing the administration's past performance as the primary reason for his current pessimistic outlook.
5Leadership Succession Dynamics
Durigan and Moretti assumed their roles after Simone Tebet and Fernando Haddad resigned to run in the recent elections. Neither former minister secured a victory. Their replacements gained significant political capital with President Lula by successfully identifying funding sources for electoral measures that helped secure his recent victory over Flávio Bolsonaro.
6Banking Sector Challenges
Banco do Brasil is currently navigating a severe crisis following disastrous third-quarter financial results. Internal reports attribute these losses to unpaid debts from large agribusiness producers who supported Flávio Bolsonaro. These debtors reportedly expected debt forgiveness, which the government never promised, leading to a significant shortfall in the bank's balance sheets.
7Future Cabinet Appointments
While names like Geraldo Alckmin and Rafael Fonteles were initially floated for the Finance Ministry, discussions have cooled significantly. Durigan remains a candidate for the Finance post, though he faces criticism from market participants for being too compliant with government spending requests. He is also being considered for the Banco do Brasil presidency.
8Timeline for Decisions
President Lula maintains a deliberate pace regarding his cabinet appointments, contradicting market expectations for an earlier announcement. Official decisions on the composition of the economic team are not expected until at least December. The administration remains focused on finalizing the fiscal adjustment bill before the president returns from his Asian tour.
Original article: Estadão — Lula Evaluates Economic Team Amid Fiscal Policy Skepticism