Haddad and Tebet cover up noise with friendly coexistence – 07/24/2023 – Market

Potential presidential candidates in 2026, ministers Simone Tebet (Planning) and Fernando Haddad (Finance) display an alignment that is at odds with the history of friction between holders of the two portfolios. The apparent harmony, however, covers up episodes of the relationship in which she was isolated, was little heard or did not explore the full potential of her voice when she had the chance – reinforcing his role in the discussions.

People close to Haddad point out that Tebet gave in a little more to the discourse of the left, while allies of the emedebista say that it was just the opposite: the head of the Treasury would have been the one who converged to the center — a posture that may have earned praise from the market, but also severe criticism from the PT itself.

Harmony in public does not mean the absence of disagreements or subordination, say allies of the minister. In spite of this, they assess, at certain times she fails to remain in Haddad’s shadow.

The press conference announcing the change in the Inflation Target System, on June 29, was analyzed by members of the government as one of those moments in which Planning could have had more voice.

Both Haddad and Tebet are members of the CMN (National Monetary Council), which also includes the president of the Central Bank, Roberto Campos Neto. The collegiate is the one who defines the inflation targets.

According to interlocutors, the Minister of Finance closed the drawing with President Lula (PT) in a conversation at the Planalto Palace, while Tebet and Campos Neto waited in the historic meeting room of the CMN at the headquarters of the Ministry of Finance.

In the interview to detail the announcement, Haddad centralized the questions, while Tebet rehearsed answering and whispered a kind of glue off the microphone, but avoided giving statements. The scene did not go unnoticed by her assistants, who preferred the minister’s greater participation in the announcement, but saw in her behavior an attempt not to run over Haddad.

For members of the government, Tebet understood the announcement as a message that the PT was there to speak on behalf of Lula. On the other hand, his silence seemed to be subordinate to the Minister of Finance.

To avoid showing friction, any disagreements between the two have so far been resolved in private conversations, without public clashes. In congressional agendas, ministers lined up to approve the new fiscal framework and the Tax Reform, two of Lula’s main economic measures.

An episode of divergence cited by interlocutors involved the elaboration of the framework. Initially, Planning occupied a lateral position in the discussions. Once included, the minister came to defend a more flexible band for the implementation of the primary result target, from 0.5 percentage points of GDP (Gross Domestic Product) to more or less. The justification was to guarantee investments.

Haddad, in turn, argued in favor of the original proposal, with a narrower band of 0.25 percentage points, relying on the government’s ability to obtain extra revenue and meet fiscal targets. The minister ended up convincing the others and emblazoned his vision.

Planning was also resentful of the lack of support in the initial negotiations for a device that avoids a cut of up to R$ 40 billion in the Budget proposal. Only in the final stretch, members of the Planalto Palace engaged in articulations.

The Treasury’s inertia was exposed by the rapporteur for the fiscal framework in the Senate, Omar Aziz (PSD-AM). In plenary, the senator said that Haddad “did not present any drawbacks” in relation to this point of the text.

There are those who say that Tebet has not yet put into practice all the power that Planning can have in discussions. In addition to the weight she brought after her role in the campaign in support of Lula, the minister has important structures under her portfolio, such as the Federal Budget Secretariat —one of the technical strongholds of the government’s fiscal policy.

Government members consider that the ministers’ relationship is good for the time being, but could change after the 2024 municipal elections, depending on the verdict at the polls on the PT’s strength to sign mayors. The proximity of the 2026 election could also affect moods.

For Tebet’s allies, there is no way she can oppose Haddad at a time when the financial market itself is praising the measures taken by the Minister of Finance. Furthermore, Haddad is trusted by Lula and is a name close to the president, while the minister does not enjoy the same status.

In private conversations, Haddad and Tebet compliment each other and refer to each other as partners. The president of the MDB, Deputy Baleia Rossi (SP), assesses that the ministers have convergent ideas, but admits to fears.

Tebet may also have to give in on other fronts unrelated to dealings with the Treasury. The PT tries to place Marcio Pochmann, former president of the Lula Institute and a historical figure of the party, at the head of the IBGE (Brazilian Institute of Geography and Statistics).

The minister was waiting for the end of data collection for the Census to change the presidency of the organ, currently under the interim command of the Director of Research, Cimar Azeredo. There were expectations that Azeredo would remain in office, but the PT wants Pochmann.

The economist’s name, however, faces resistance from part of Planning, for whom he does not have notable knowledge to occupy the post. Another wing of the ministry, however, assesses that accepting the nomination can demonstrate goodwill with Lula’s acronym.

Despite this, the relationship between Haddad and Tebet has proved to be fine-tuned, contradicting bets that the two portfolios would live on a war footing over the conduct of economic policy.

The final product of this interaction is an inflection in the dynamic between the two ministries in the past, according to parliamentarians and government officials.

There was concern, on the part of allies of both, that the coexistence of the two in the government could be marked by the dispute for leadership — something that has not materialized so far.

The relationship goes against the grain of others observed in the past. In the first government of Fernando Henrique Cardoso (PSDB), the then Minister of Planning, José Serra, was at odds with Pedro Malan (Finance), whom he criticized for his attitude towards public spending and interest. Under Lula, the clashes took place between Antônio Palocci, then head of the Treasury and who fell in favor of the financial market, and Guido Mantega, at the time head of Planning.

One of the arguments of Minister Paulo Guedes for merging several portfolios in his Ministry of Economy was precisely to unify the line of thought in different areas and avoid the usual friction between portfolios.

Tebet and Haddad speak frequently, almost daily. Close allies of both say that the “saint hit” and that they demonstrate convergence of thoughts on economic decisions. Tebet has the view that the government “has to work”, hence the need to act for the whole, not for its own cause.