‘Lulanomics’: What We Know of Former President’s Economic Plans

Leading the polls, Luiz Inácio Lula da Silva has plans to separate Petrobras from global prices, reverse the labor reform and end expenditure caps, among others

Former President Luiz Inácio Lula da Silva speaks during a ceremony at the headquarters of the Metalworkers Union in São Bernardo do Campo (Victor Moriyama/Bloomberg)
April 12, 2022 | 05:01 PM

Bloomberg Línea — Unlike Brazil’s 2002 election, when workers’ party (PT) candidate Luiz Inácio Lula da Silva committed himself to fiscal responsibility through his ‘Letter to the Brazilian People’, the Lula of 2022 has already made incisive statements that he does not intend to sign a similar document as a signal to the market because he believes that the primary surplus predominant in his two terms in office (2003-2010) speak for themselves, and are sufficient credentials of economic performance.

In Lula’s closest circle, and with roles in the pre-campaign, are his friend Paulo Okamotto and former ministers Franklin Martins, Luiz Dulci, Celso Amorim and Aloizio Mercadante (who currently presides over the PT-linked Perseu Abramo Foundation), as well as former PT president Rui Falcão, the latter two responsible for drawing up government policies.

And the PT’s current president, Gleisi Hoffmann, usually accompanies Lula on most of his outings and on his agenda.

The choice of Geraldo Alckmin as vice-presidential running mate was a nod to the center, as well as the Central Bank’s autonomy. Lula has adopted a strong rhetoric against spending caps, labor reform, and Petrobras’ pricing policy.

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In the economic sphere, according to people close to the former president, Lula does not authorize anyone to speak for him. The former president usually talks to Mercadante and economist Luiz Gonzaga Belluzzo. The rising star in this circle is Gabriel Galípolo, former president of Banco Fator.

Galípolo, who is close to Belluzzo, made waves when he accompanied Gleisi Hoffmann to a dinner with business leaders earlier this month. A discreet figure, he had already been invited by Lula to accompany him to a meeting with members of a recyclable material collectors’ cooperative in Brasília last year.

Unlike Guido Mantega, who wrote an article on the PT’s economic ideas in January for the Folha de S.Paulo newspaper and later said publicly that he would not be part of a future economic team, Galípolo dropped out of view after the dinner, but has not been publicly disavowed by the pre-candidate or anyone in his closest circle.


But, according to people close to the former president, the presentation of an economic team or a program are not yet on Lula’s agenda.

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In his pre-campaign speeches, Lula has used rising prices to attack President Jair Bolsonaro. In interviews he grants to radio stations in the interior of the country, the PT flag-bearer has blamed the president for inflation, arguing that the federal government is responsible for fuel and energy price policies, which account for 40% of core inflation.

“We brought inflation to 4.5%, generated 20 million jobs, had a primary surplus during the whole government, paid the debt to the IMF, lent $10 billion to the IMF, and still had left $370 billion in reserves, which is what is saving Brazil today,” Lula said in an interview with journalists in Brasilia last year.

And according to Lula it is this legacy that “is worth 500 Letters to the Brazilian People”, yet he has not set out so far how he intends to address the issue of inflation, beyond the end of parity with international prices in state-owned oil company Petrobras.

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Petrobras (PETR4) has become a major theme of the election, and Lula adopted the slogan that he will “Brazilianize” the prices charged by the company. In practice, he has promised to end the parity with international oil prices, and eliminate the exchange rate from the equation that determines prices at the pump.

His argument is that Petrobras’ costs are in reais, and that the current policy, which has paid strong dividends to shareholders, is wrong.

Lula has also promised to reverse Petrobras’ exit from the refining sector to produce derivatives within Brazil.


Since the Michel Temer administration, the state-owned company has concentrated on exploration and left sectors considered non-strategic by Pedro Parente’s management at the head of the company.

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The question of ending Petrobras’ refining activities obeyed the logic of increasing competition in the derivatives business and allowing more private agents to operate in both refining and exports. However, Lula has criticized the existence of “more than 400 companies now importing fuels”, and promises to bring Petrobras back to refining.

“I want to say here loud and clear, I know that the market gets nervous when I say this, but I want you to think about the following: we are going to make the price of gasoline Brazilian. The price will be Brazilian, because the investments are made in reais. We will take gasoline and increase the refining capacity”, Lula said in an interview with a radio station in Ceará in February.


In his speeches, Lula has repeated that the spending cap, a mechanism created by the Temer administration that limits the increase in federal spending to inflation, is a rule that is the result of “the incompetence of those who govern the country, and he has already signaled an expansion of public spending in what the government considers a priority, such as on social programs.


“We will do whatever is necessary to improve the lives of the people. We will spend whatever it is necessary to spend. Often the expense is investment (...) You don’t have to limit, because when you limit, it is to spend less for the benefit of the people. They consider as expenses paying pensions, salaries, investments in health”, Lula told a radio station in Paraíba last month.

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Lula has already promised not to privatize companies that he considers strategic, should he win the elections, such as Petrobras, Eletrobras (ELET6) and the Post Office. His most incisive tone has been in response to the Bolsonaro government’s proposal to privatize the holding company that controls state-owned electricity generation and transmission companies.

“Now they will want to privatize Eletrobras to increase the price of electricity more, to leave the people more in the dark. The private sector has no concern if the people are living more in the dark, if they are cooking by lamp light, if a woman is sewing by lamp light. What they want is profit. The state is the one who has to take care of the people,” Lula has said.

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For the left-wing candidate, programs such as Luz para Todos (Electricity for All), to universalize access to electricity, would not have been possible if Eletrobras were under private control, because such programs depend on the political will of the government. According to Lula, with Eletrobras in private hands, no business leader would promote a grid expansion to serve the poorest part of the population because they wouldn’t make a profit.

Lula has not yet made statements about the infrastructure concessions, such as ports and airports, carried out or planned by the Bolsonaro government.

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Lula has hinted that he will not attempt to reverse the legislation granting autonomy to the Central Bank, should he return to power.


In January, during an interview with journalists and left-wing bloggers, Lula said: “People put obstacles in the way of an independent Central Bank. Look, the Central Bank has to be committed to Brazil and not to me. There is going to be an inflation target, we are going to set an employment target, and an economic growth target as well. Let’s commit to something positive.

“Who has to call the guy [Central Bank president Roberto Campos Neto] to talk? I do. I don’t know him, but when I win, I will call him, I’ll say, ‘come here, let’s talk a little bit’, and we will discuss Brazil in a good way. I see opposition, but I don’t see an obstacle”, Lula said.

As for the Ministry of Economy, in the discussions that have taken place within the PT, the path considered would be a split between the treasury and planning areas, in a structure similar to the one that existed before the concentration of power carried out by Paulo Guedes.


At a private dinner with senators in Brasília last year, Lula expressed a fear that the situation of the economy would deteriorate by 2023, and a finance minister who is “a politician”, not a technocrat, was needed, one of the participants in that meeting told Bloomberg Linea.

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Lula has said on more than one occasion that he intends to reverse the labor reform approved during the Temer administration, but has so far offered no details on how this would be done.

In an interview with a radio station in Minas Gerais in February, Lula defended a discussion between unions, business leaders and the government to study changes to the reform. He said that the reform took away workers’ rights and excluded a large number of people from social security benefits, using the example of app-based delivery drivers working the gig economy.


In the same interview, he added: “Reforming the house is to improve the house. Reforming the car is to improve the car. But what they did with the labor reform was a destruction. It is as if they had dynamited the rights of workers, everything we have built since 1942”.

“They promised a bridge to the future, but they dug a chasm and forgot to build the bridge. All that was left was the hole, into which the people are now falling,” he said at the time.

Last week, Lula also criticized the labor reform for having cut the source of funding for unions.


Another motto that Lula has repeated is to “put the poor in the budget, and the rich in income tax’. The former president has already said that he intends to change the income tax exemption range for those earning up to five minimum wages (R6,060 reais). Today, the exemption applies to those who earn up to 1,903 reais.

The taxation of dividends would be one way to offset the loss of revenue with the expansion of the number of exempt taxpayers, Lula says.

Some PT economists have publicly defended taxing large fortunes, something the party had not implemented during 13 years in government, but Lula has yet to talk about it.

Translated from the Portuguese by Adam Critchley