The minister’s promises, such as narrowing the gap in government accounts and zeroing the deficit by mid-2024, are behind the party’s attacks on the economic team
BRASILIA – The promise of Finance Minister, Fernando Haddad, to reduce the gap in public finances to 1% of gross domestic product (GDP) in 2023 (R$100 billion) and zero the deficit in mid-2024 is the basis of the PT’s attack on the economic team. Friendly fire gained more time ball trials: the political dispute over the reinstatement of federal gasoline taxesbut long before that this dissatisfaction was seething and could be observed in the WhatsApp groups of party members.
Since the announcement of the fiscal package by the economic team, when Haddad greeted with the reversal of the BRL 231.5 billion deficit to a BRL 11.1 billion surplus, the criticisms have only increased. For the leadership of the PT and economists related to President Luiz Inácio Lula da Silva, the risk of a downturn in economic activity, with the Selic rate at 13.75% and a looming credit crisis, there is no need to talk about deficit reversal. A commitment made by the finance minister considered wrong by the political wing.
In the assessment of this group, the fiscal adjustment must be gradual, throughout Lula’s term, after the new government manages to approve the Transitional Proposal for Amendment to the Constitution (PEC), which increased spending in 2023. In In this context, the main objective is to prevent the economy from recession and to ensure higher growth, which would provide higher revenues and a more favorable fiscal trajectory. The view is that the government can live with deficits longer.
With the adjustment package, Haddad made a 180º reversal in this trend, which ended up improving market confidence in the government’s ability to present a new fiscal framework, but disaggregated the PT and more ideological ministers from the political core . The minister, according to the PT, would mistakenly align himself with the market and would jeopardize the popularity of the president, which could open spaces for the opposition of the extreme right.
In the wake of this public pressure, which initially focused on President of the Central Bank, Roberto Campos Neto, and extended to Haddad, the government announced the increase in the minimum wage, the correction of the individual income tax table, the new Minha Casa, Minha Vida and will soon announce the debt negotiation program, Desenrola. The president of the PT, Gleisi Hoffmann, expressed her annoyance by taking a stand against the new encumbrance of fuels.
Guru
The defenders of gradual adjustment now have André Lara Resende as their economic “guru”, one of the creators of the real plan and a fierce critic of high interest rates and the charge of fiscal risk to keep the Selic rate at 13.75% in Brazil . For Lara Resende, Brazil has a much lower debt than all developed countries, in line with developing countries.
Inspiration for a wing of the PT that rails against Finance Minister Fernando Haddad, the economist André Lara Resende criticized, in a recent article in the newspaper Valor Econômico, colleagues and the press for, according to him, “hammering” the problem of public opinion deficit and debt unsustainability.
“Incredible: there was a surplus of 126 billion reais (in 2022), equal to 1.3% of GDP. Gross public debt, which according to analysts is on an explosive trajectory, fell by 1, 1% as a percentage of GDP, at 73.5%.One would expect the heralds of the fiscal cliff to acknowledge that, at the very least, they have exaggerated the fiscal issue.Resende, who has been cited by the market as a candidate for Director of Policy Monetaria at the Central Bank in place of Bruno Serra, whose mandate expires today.
This point, however, has been used by allies of Jair Bolsonaro as evidence of an improvement in public finances and that it is not possible that the Lula government can speak of a “cursed legacy”.
Source: Terra
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