Lula’s speech will be tested by right-wing Congress, inflation and low employment – 03/04/2023 – Vinicius Torres Freire

The political year seems for the time being the year of Brazilian football, which begins with these state championships, generally a floodplain. So far there have been no matches in Congress, for example.

There were only friendlies for the distribution of positions, with an inconclusive result. The hard game of sharing power and money has yet to begin. The tactical scheme that Luiz Inácio Lula da Silva designs or improvises has not been tested in the real fields of employment, inflation or Congress. In the interest rate arena, the government is losing a lot.

Lula still hasn’t had to play with (or against) Arthur Lira (PP-AL), mayor, prince of the centrão, sultan of parliamentary amendments, commander of legislative tractors and former regent of Jair Bolsonaro’s dark government. We have already forgotten the result of the 2022 election, but it should be remembered that Lula will play in the opponent’s field, with many players less. The situation is so difficult that the PT government passed a red cloth for Lira’s peaceful re-election – it was wise.

For the first time in the 1988 Republic, Congress is dominated by parties that mix the extreme right with a right that, being so negotiator, would steal even the old MDB.

Congress got used to sending more and its chiefs got used to having more money to share. The State-owned Law rationed the number of positions for bargaining. Aside from obligatory expenses, the resources left over from the Budget are minimal. It became more difficult to acquire support.

There is about to appear, in a mythical future, a Congress that is opposed to increased spending, which in theory would be to Lula’s liking (who may be prevented from doing so by reality). But it seems clear that parliamentarians are not going to mess with liberal and similar reforms.

In addition to granting power and resources, Lula’s performance in Congress also depends on popularity. The president reached his third term against the will of almost half of the electorate. He has little fat to burn. In normal times, prestige varies with inflation and employment.

It would be very difficult to save the economy in 2023. Now, there is a risk that 2024 will go to waste. Lula chose the Central Bank as the scapegoat for an eventual failure. How long can the discourse about interest rates and “rentiers” stick if there is no improvement in employment and inflation, a decrease in the economic “suffering rate”?

For the time being, Lula must have the support of his most loyal supporters, as he has kept Bolsa Família at at least R$600. However, this is at most a quarter of the electorate. What’s more, the benefit has been eaten up by inflation. Since April 2020, when the BRL 600 aid appeared, food inflation has been 40% (“food at home”, according to IBGE statistics). The food shortage continues to run at more than 10% per year.

For the population outside Bolsa Família, an average of three quarters of income comes from work. The pace of job creation was strong in 2022, but it slows down quickly and is likely to continue, given the tightening of interest rates and economic uncertainty. Since November, Lula’s speech has provoked an even greater increase in interest rates, spread uncertainty and dampened optimism among money holders (for whom Lula 3 would be Lula 1, not Dilma 1).

If Lula and PT let Fernando Haddad and his team work, it is possible to save 2024. This is what will be seen starting this March, when the games begin.

For the time being, economic management is haunted by zombies from the old left’s bestiary, such as price manipulation, favors for businessmen, export taxes or the idea that you can spend as much as you want and keep interest rates and the dollar at friendly prices.

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