Lula puts union members and old friends in key government positions

At the same time that he articulates his support base in Congress, being forced to cede chunks of power to the Centrão, President Luiz Inácio Lula da Silva commits efforts to the PT’s permanent strategy of equipping the Brazilian State, bringing back to the public administration friends , former party mates and trade unionists.

From the outset, the composition of the ministry caused a certain deja vuwith the return to the scene of historical PT figures, such as ministers Fernando Haddad, Alexandre Padilha, Rui Costa and Paulo Pimenta, in addition to Celso Amorim, now with the status of presidential adviser.

From then on, the sensation was renewed, with the nominations of second and third echelons. Every little, a new “old companion” was chosen to preside over some institute, state, autarchy or public bank.

On the list are the names of former ministers from previous administrations, defenders of the New Economic Matrix – which sank public accounts and the GDP –, left-wing economists and other characters with whom Lula seems to owe some sort of debt of gratitude.

There are also people linked to unionism, the birthplace of the president himself, starting with the Minister of Labor, Luiz Marinho, a friend of Lula since the days of the São Bernardo Metalworkers Union, in the distant 1980s, the golden age of union movements.

The unemployed under the Dilma Rousseff administration – after the extinction, in the Jair Bolsonaro government, of the positions that appeared in the Official Gazette under the acronym DAS 5 and 6 (Superior Direction and Advice) and NE (Special Nature) – were also not forgotten. In 2011, they occupied 1,300 positions distributed in 190 public bodies and constituted the elite of the federal administration, with average salaries of R$ 20,000.

State companies are prioritized in the occupation strategy

When he took over the government, Lula now had 28,182 positions and positions of trust available to be filled. The estimated cost of this staff is BRL 33.7 million per month, according to a survey by CNN based on the decrees issued on January 1st, detailing the structure of the Executive. It was time for the return of the “companion”.

Since the transition team, made up mostly of PT members, it was already foreseen that the “Republic of Companheiros” would supersede the idea of ​​a “broad front” government. The sworn ministry confirmed the expectations and the occupation process continued by the state-owned companies.

For the jewel in the crown, Petrobras, was chosen the former senator Jean Paul Prates, substitute for Fátima Bezerra, elected to the government of Rio Grande do Norte. An energy specialist, Prates has always worked in the area in the public and private sectors, but the probable conflict of interests was not an obstacle to his confirmation in the position.

Even with the market’s fear of interference in Petrobras’ pricing policy, which is controlled by the Union but also has private partners, the name ended up being approved by the company’s Board of Directors, along with two other directors aligned with PT management.

Prates went on to command the Brazilian state-owned company that pays the highest remuneration to its president: R$ 116,800 monthly as fixed remuneration, plus 13th and additional vacations, without considering bonuses paid according to the company’s results. In 2021, for example, total remuneration (fixed and variable) amounted to BRL 1.6 million, according to the most recent Aggregate Report of Federal State Companies.

A subsidiary of Petrobras, Transpetro, responsible for the storage and transport of oil and derivatives, is in second place in the ranking of salaries of state-owned companies. To command it, the chosen one was Sérgio Bacci, vice-president of Sinaval, an entity that represents shipyards and companies in the shipbuilding industry.

This sector is about to benefit from a protectionist decree to restrict the chartering of foreign ships for cabotage, according to a report by the People’s Gazette.

Lula also wants the Brazilian shipbuilding industry to be privileged in orders from Petrobras, and for that the government is considering resuming the local content requirements adopted in previous PT governments.

Next comes the BNDES, the National Bank for Economic and Social Development, to which Lula appointed former Minister Aloizio Mercadante.

Economist with a developmental profile, Mercadante seeks to make the bank an instrument for expanding state intervention in the economy, as happened before in the Lula and Dilma governments.

Through credit at interest subsidized by the National Treasury, the policy of “national champions” informally instituted “state capitalism”, benefiting large sectors of industry and hand-selected companies.

Mercadante denies that the bank will resume the subsidy policy, but has criticized the TLP – Long Term Rate, which was adopted by the bank in 2018 and in practice reduced the state subsidy to loans – as incapable of promoting the “development of national industry” .

Trade unionists in public bodies and financing entities

Lula and the PT acted strongly by nominating trade unionists in the “Conselhão”, the Sustainable Social Economic Development Council, recreated in the first month of government.

PT training base and staunch supporter of Lula’s election, the trade union movement took its toll and was not forgotten by the government. It was personified in the first echelon by the Minister of Labour, Luiz Marinho, former president of the Central Única dos Trabalhadores (CUT), and in addition to him other former members of the movement took up positions in the public administration.

Lula nominated Vagner Freitas, former president of the CUT, to head the Social Service for Industry (Sesi). Freitas gained prominence in the demonstrations against the impeachment of Dilma Rousseff, when he defended “going to the streets entrenched, with a gun in hand” to defend the PT’s mandate.

He is a leader of the São Paulo Banking Unions, the historic birthplace of PT founders and leaders, such as former ministers Luiz Gushiken, Ricardo Berzoini and former party treasurer João Vaccari Neto, all involved in investigations such as Operation Lava Jato .

Two new presidents of pension funds also came from the Bank Workers’ Union. The largest of them, Previ, of Banco do Brasil employees, was now headed by João Luiz Fukunaga, appointed by the president of the Bank, Tarciana Medeiros.

For the Correios pension fund, Postalis, Lula appointed Camilo Fernandes dos Santos, still honorary president of the Bank Workers Union. Both pension funds were investigated by Operation Greenfield for suspected billionaire fraud.

Centers have agendas met and charge funding

For the directors of Petrobras, who pay an average salary of R$ 50,000, Jean Paul Prates appointed members of the sector’s unions. Among them José Maria Rangel, member of the Single Federation of Petroleum Workers (FUP), affiliated to CUT. At the head of the oil company’s directorate of social works, he will command a budget of R$ 450 million.

In addition to caring for his companions, the Lula government invests in the relationship with the union centrals, especially the CUT, the oldest and deeply identified with the PT, taking into account agendas such as the readjustment of the Income Tax table and the increase in the minimum wage above of inflation.

At the same time, whenever possible, it signals the resumption of financing for unions, which bled with the end of the compulsory union tax. Lula has already said publicly that Minister Luiz Marinho should be charged for “doing what has to be done”.

Marinho promises to present a decree to review some points of the labor reform and recreate a compulsory contribution still in August. Even with little chance of approval in Congress, neither Lula nor Marinho seem to want to give up.

Market reacts to echoes of the New Economic Matrix

From time to time, the return of the partnership generates a greater impact on the market. There was resistance to the name of Fernando Haddad for the Ministry of Finance and, especially, that of Aloisio Mercadante for the BNDES.

More recently, the name of economist Márcio Pochmann was confirmed for the presidency of the IBGE, in a botched episode that weakened Minister Simone Tebet, of Planning, to which the body is linked.

Soon after, Lula’s goal of naming former Minister Guido Mantega for the presidency of Vale – a private company – from 2024, the end of the current term of the current CEO, Eduardo Bartolomeu, came to light.

The attempt is similar to the pressure to change Vale’s president between the end of Lula’s second term and Dilma’s first. The petista began to make public criticisms of the executive Roger Agnelli from 2009 and in 2011 the government managed to replace him.

Economic agents reacted to the names of Pochmann and Mantega and on July 27 the B3 (the Brazilian stock exchange) closed down 2.1%, with the redemption of R$ 450 million by foreign investors.

Pochmann, faithful representative of the PT’s economic heterodoxy, accumulates a history of controversial statements, such as the defense of the 12-hour week and the speech in which he classified Pix as an “instrument of neoliberal prescription”.

His name suffered resistance even within the government and the choice became a meme on the internet. The fear is that the agency will lose credibility with the prospect of manipulating data for political reasons, as happened during Pochmann’s tenure at the helm of the Institute for Applied Economic Research (Ipea).

Guido Mantega causes chills in the market for being one of the creators and executors of the New Economic Matrix, a set of interventionist measures implemented mainly in the Dilma government, including the damming of public tariffs, subsidies to chosen sectors and the artificial reduction of interest rates, similar to the one Lula tried to pressure the current president of the Central Bank, Roberto Campos Neto, to do so.

The result was the collapse of public accounts, recession and the downgrading of Brazil’s investment grade – a rating still far from being recovered, despite the slight improvement in the credit rating by the international agency Fitch.

Despite the criticism, Lula supported Pochmann’s name. Guido Mantega’s was harshly rejected by private shareholders. The consensus is that it would not pass the Board of Directors, where the government has no direct participation and only has two seats from Previ, Banco do Brasil’s Investment Fund.

Lula backed down, but the perception among government advisers is that he has not given up on Mantega. It’s just “warming up” time. Amid pauses and setbacks, the PT’s project of power advances.