Haddad tries to make decision on goal for 2024 – 11/05/2023 – Market

President Luiz Inácio Lula da Silva (PT) was provided with pessimistic data about the government’s ability to reach zero deficit just hours before publicly calling into question the goal set by his first-time ally, the Minister of Finance, Fernando Haddad.

Last Wednesday (26), Haddad, Esther Dweck (Management), Rui Costa (Civil House), Simone Tebet (Planning), among other representatives of the departments, met and analyzed the measures approved by Congress.

From there came the realization that it remains difficult to guarantee sufficient revenue to reach a zero deficit next year without the need for a large contingency.

The diagnosis was taken to Lula who, the following day, publicly expressed for the first time that he saw obstacles to achieving the goal. The declaration gave fuel to the wing of the government that advocates changing the goal immediately, including sending a presidential message to Congress.

Aware that he is losing the debate, minister Fernando Haddad began to defend the March deadline with Lula as the limit for making a decision. This is because the month is when the Treasury presents a balance of government revenue.

According to government members, the fiscal framework allows the government to send a modifying message to Congress changing the target.

According to allies, Haddad has not given up on maintaining the target he set, but is working to minimize wear and tear.

Despite having only expressed it publicly last week, Lula’s distrust of the outlined objective is not new.

Since the middle of the year, when other ministers were already taking arguments to the president in favor of changing the target, Lula told allies that, if the price for the deficit was to make a very large volume of contingencies next year, to the point of compromising his government program, he would not be willing to pay.

The president also told allies that he feared that Haddad was creating a problem that would be difficult to get out of. Even so, he maintained his support for the plan drawn up at the Treasury. The change in tone occurred last week, after he received the pessimistic diagnosis in a meeting with ministers from the economic team.

On Thursday (26), during breakfast with journalists, Lula expressed his concern.

“Let me tell you something. Everything we can do to meet the fiscal target, we will meet it. What I can tell you is that it doesn’t need to be zero. We don’t need that. I’m not going to establish a fiscal target that forces me to start the year by cutting billions in works that are a priority in this country”, said the president during coffee with journalists in response to a question from the Sheet.

The president’s statement caught members of the government by surprise because it was not previously agreed with Haddad. The speech intensified the defense of changing the goal that was already made by ministers and led by Rui Costa (Casa Civil).

According to Sheet It was found that, at the meeting held on Wednesday, there was an agreement that, before deepening the debate on changing the target, the government would wait for Congress to analyze the rest of the measures in the collection package, to verify the final amount of revenue.

Meanwhile, Lula would take the opportunity to encourage parliamentarians to approve measures that could bring new revenue to the government. This week, for example, Lula had meetings with the president of the Chamber, Arthur Lira (PP-AL), with leaders of the House and with the president of the Senate, Rodrigo Pacheco (PSD-MG). On every occasion, he asked for commitment to approving the government’s economic measures.

But Lula’s statement gave fuel to the wing that advocates changing the fiscal deficit now through a message sent by Planalto.

Haddad has said that, more than achieving it, the main objective must be to pursue what has been established. The market itself has already priced in that the government will not meet the zero deficit and predicts it to be 0.75% of GDP. If the Union manages a deficit of 0.25% of GDP in March, this would be less worse than what was priced in by the market.

The discussion around the target set by the Treasury has been going on since at least July. As shown by Sheet In August, Minister Simone Tebet herself defended in a meeting with other peers that the deficit be changed to 0.5% of GDP with the realization that it would be necessary to make a broad contingency in 2024, the election year.

As shown by Sheet, the contingency could reach R$53 billion, as the 2024 budget proposal foresees R$211.9 billion. The president, however, had been holding back the debate.

This week, Lula made some public and private statements that go against the idea of ​​holding back spending.

On Tuesday (31), in a meeting with leaders of the Chamber and presidents of allied parties, Lula said that there will be no contingency on expenses foreseen in next year’s Budget.

The president specifically said that there will be no cuts in investments, such as works and spending in the social area.

The public divergence reflects, in the assessment of the president’s own allies, a disconnect that has marked the government.

On Friday (3), Lula returned to the topic and stated in a meeting with ministers from the infrastructure area that, for the Presidency, good money is not kept in the National Treasury, but is transformed into work.

The head of the Executive asked the ministers in the area — and in the presence of Haddad — that they be the “best spenders of money on works of interest to the Brazilian people.”

“We cannot leave money left over that is expected to be invested in the ministries. We need to put it in, transform it. I always say that, for those in the Treasury, good money is money in the Treasury. For those in the Presidency, good money is transformed into works.”