Bloomberg Línea — Voted for the third time as president of Brazil in a runoff election with 50.90% of the votes, Luiz Inácio Lula da Silva will take over a polarized Brazil, and which is markedly different from his two previous terms in office (2003-2010).
In his first term, Lula took office facing an inflation rate of 12.53% in 2003, which he inherited from former president Fernando Henrique Cardoso, while at the start of his second consecutive term, in 2006, inflation had dropped to 3.14%.
However, at the end of his term, in 2010, inflation had risen to 5.90%. As of August 2022, inflation stands at 8.73%, according to the Brazil’s statistics bureau IBGE.
The continuing rise in prices has unnerved leaders and monetary authorities around the world, although the expectation is that the consumer price index (IPCA) will decline in the first year of the new administration. By 2023, inflation is expected to be 5%, above the Brazilian central bank’s target of 4.75%.
As in 2022, economists do not expect the next government to face a favorable scenario for public finances in 2023.
Other outstanding issues to be addressed by the next government should be environmental policy, unemployment, education, and foreign policy.
The government plan of the president-elect was presented as a “program for the reconstruction and transformation of Brazil”, in a proposal submitted to the country’s electoral court (TSE).
As the first commitment of the new government, the document highlights the “re-establishment of living conditions for most of the Brazilian population”. To achieve this, the proposal calls for policies to support families suffering from economic crisis and hunger.
One of Lula’s first challenges will be to deal with a Congress with more allies of Jair Bolsonaro, and favorable to the current president’s center-right agenda.
1 - Economy
Among Lula’s main proposals for the economy are curbing inflation, carrying out a fiscal reform, repealing the spending cap, and revising the current tax regime.
For that purpose, the document proposes “reinvesting in infrastructure and housing, national re-industrialization using new technological and environmental bases; land reform and the encouragement of the economy of solidarity, the creative economy and an inclusive green economy, based on the conservation, restoration and sustainable use of biodiversity”, as well as a fiscal reform so that the poor pay less and the rich are taxed more.
It also refers to the current labor legislation, and the intention to revise it.
“We should expand support for cooperativism, entrepreneurship, and micro and small businesses,” the program states.
2 - Education
In his government plan, Lula reaffirms his intention to restore investment in education, from basic to higher learning, in order to “eradicate the gap caused by the pandemic”.
Lula also intends to grant more science fellowships for undergraduate and graduate studies and to maintain the current fee policy.
In addition, in a speech, Lula said that the student financing fund (FIES) “will come back stronger”. He also signaled a push for the Universidade para Todos (ProUni) program, which enables access to higher education for low-income people.
3 - Environment
In his government plan, Lula aims to fight the consumption of natural resources and to stimulate economic activities with less ecological impact. To this end, the document states that it will be necessary to recover government capacity, as well as the planning and social participation through the strengthening of the national environmental system and the National Indigenous Foundation (FUNAI).
Increasing Brazil’s competitiveness is also cited in the plan as one of the priorities of the new government. It will “build effective measures to cut red tape, lower the cost of capital, expand international trade deals that are important to Brazil’s development, advance digitization, invest in innovation, scientific and technological research, protect the environment and benefit industrially and commercially from our competitive advantages such as, for example, the biodiversity of the Amazon”.
Lula is expected to appoint a special climate secretary to help rebuild Brazil’s image abroad on environmental issues, Bloomberg News reported, based on information from people who worked on his campaign.
This official would have a similar status as John Kerry in the US government, who could set out bolder objectives for Brazil when negotiating with the United States and Europe.
4 - Foreign policy
Regarding foreign policy, Lula’s plan points out that the defense of national sovereignty “requires recovering the active and proud foreign policy that made us a global player”, and advocates the reconstruction of international south-south cooperation with Latin America and Africa, as well as expanding Brazil’s participation in multilateral organizations.
“Strengthen Mercosur, Unasur, Celic and Brics again (...) work for the construction of a new world order committed to multilateralism, respect for the sovereignty of nations, peace, social inclusion, and environmental sustainability that takes into account the needs and interests of developing countries, with new guidelines for foreign trade, trade integration and international partnerships,” the document says.
It also aims to resume and expand public policies for Brazilians abroad and their rights of citizenship based on bilateral agreements, and the integration of South America, Latin America and the Caribbean to support regional security and promote the region’s development.
5 - The role of the state
In a campaign rally, Lula went so far as to say that privatizing Petrobras, a proposal of his rival Bolsonaro, would be “stupid”, and that he could not say yet whether privatizations would be reviewed. In fact, his government plan strongly opposes the privatization of Petrobras, Eletrobras and the postal service.
“It will be necessary to protect the country’s patrimony and restore the role of the state as inductor and coordinator. It will also be necessary for state-owned companies to fulfill their role in the process of economic development and social, productive and environmental progress of the country,” according to Lula’s government plan.
The document also cites the strengthening of public banks, such as Banco do Brasil, Caixa Econômica Federal, Banco Nacional do Desenvolvimento, Banco do Nordeste, Banco da Amazônia and Financiadora de Estudos e Projetos (FINEP). There is also the expectation that Lula will resume development bank (BNDES) investments after their reduction by the Bolsonaro administration.