Lula’s successes 3 and the beginning of the political heat wave – 09/21/2023 – Vinicius Torres Freire

In political politics and in the universe of major economic decisions, the air is somewhat still. In the most media-related matters and on several fronts, the news is positive for the government. In Congress, despite threats and some ruinous decisions for the economy, the direction of work in this second half of the year is still unknown.

As far as the more immediate economic situation is concerned, the problems remain at a low boil and, in the short term, the government cannot do much about it — but something can.

The collection of taxes and other revenues from the federal government continues to fall, being lower than last year, as can be seen in the data released this Thursday (21) by the Federal Revenue Service. Even disregarding the faniquito in the financial markets, also this Thursday, longer-term interest rates are higher than in June.

No, this is not a harbinger of disaster. These are headwinds for the growth of 2024. More than that, these are issues that will also emerge politically until the end of this year, which in practical terms will last just over two months. That is, they will appear in the discussion and voting on tax increases (or the end of exemptions). Or in the debate about the possible change in the deficit target to 2024 (that would be terrible). What will happen to the constitutional linkage of spending on health and education to revenue growth, which is a serious problem for the “fiscal framework”. According to Minister Fernando Haddad (Finance), it would be subject to review later this year.

We also have to save the tax reform, now anchored in the Senate, where it has a lot of barnacles from the lobby of elites and privileged sectors, who want to escape the change and throw the bill to someone else.

There are, therefore, a large number of serious matters to be resolved in more or less a two-month period. Don’t even mention the bomb agenda, the unfeasible, particularistic and inefficient spending projects that are cooking on the agenda of the Chamber and Senate.

However, for now, the air is calm, at least towards the Palácio do Planalto. There are tensions and conflicts around the Supreme Court, with difficult judgments that will have side effects — such as the right of indigenous people to lands from which they were expelled by bullets and plagues (“time frame”) or the possession and consumption of drugs. The Congress between conservative and reactionary may bristle. But it may come to nothing, from the government’s point of view, as happened with risky CPIs, installed at the beginning of the year, when Lula 3 had not yet realized the political risk he had to face in Congress.

Speaking of which, it is yet to be seen how successful the government’s efforts were to mitigate the risks that an even more right-wing, reactionary and negotiating Chamber could cause to its government.

Luiz Inácio Lula da Silva’s travels brought him public success; the president managed to smooth out some rough edges and barbs from some of the more clumsy speeches, although speeches alone are unlikely to change much of Brazil’s situation in the world. Still, point for the government. On another favorable front, the military is trying to get out of the coup mess, at least saying publicly that they intend to isolate or even expel the uniformed militants of Bolsonarism (a lot, and every day more is known about the military coup). Bolsonarism has more casualties.

The summary of the opera is that the government and its larger interests and projects are not at the center of the whirlwinds of the country’s political life for now. But a heat wave is coming. In a few months, it will be necessary to decide where the money will come from that will shape the success of 2024 and shape expectations of what Lula 3 could be.

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