List of economists “disappointed” with Lula 3 is growing

With public accounts in the red, lowering of targets and President Luiz Inácio Lula da Silva (PT) irritated by the discussion about the government’s finances, the list of supporters “disappointed” with the government’s economic policy continues to grow.

One day after Arminio Fraga, former president of the Central Bank and partner at Gávea Investimentos, stated that the country is showing explicit deterioration in the field of public finances, it was the turn of Luís Stuhlberger, CEO of Verde Asset Management, to express disappointment and criticism in in relation to the management of public accounts.

“I regret having believed that the PT could have any fiscal seriousness,” said Stuhlberger at an event organized by the manager on Tuesday (7). The executive is often described as one of the largest fund managers in the country, due to the significant returns presented over the last few decades by the Green Fund.

According to him, the milestone for the change was the announcement, on April 15, of the change in the primary result target (difference between what the government spends and what it collects, excluding interest expenses) for 2025 and 2026.

On the occasion, the Minister of Finance, Fernando Haddad, announced that the target for next year would go from a surplus of 0.5% of GDP to zero deficit, that is, a balance between what is collected and spent.

“This 2025 budget guidelines bill (PLDO) was a watershed in terms of what to expect from this government in fiscal terms,” said the Verde manager.

Stuhlberger also highlighted that the fiscal framework ended up becoming a “piece of fiction” and that, now, what he thought was “noise” became “signal”. The manager indicates that he has once again considered fiscal risk. “The great ease of changing the framework has called its credibility into question,” he said.

Public accounts have been deteriorating since the beginning of Lula’s current term. According to the BC, the primary result in 2022 – at the end of Jair Bolsonaro’s (PL) administration – was a surplus of R$126 billion (1.28% of GDP), fueled in part by non-recurring revenues and postponement of court orders.

Today the country has a deficit of R$252.9 billion (2.29% of GDP) in 12 months, according to the most recent data, from March. As a result, public debt has been growing. Gross debt went from 71.7% of GDP at the end of 2022 to 75.7% of GDP in March 2024.

Several liberal economists who supported Lula in the second round of the 2022 presidential elections, in the confrontation with Bolsonaro, today complain about the PT member’s economic policy. They point out antiquated views regarding the economy and the lack of concern regarding fiscal issues and criticize Lula’s attacks on the Central Bank’s monetary policy.

Among the supporters currently uncomfortable with the PT administration are Pedro Malan, Elena Landau, Pérsio Arida and Henrique Meirelles.

Former BC president says the framework is “not working”

Fraga also remains critical of the fiscal framework. He says that the measure “is not working” and pointed out that Brazil is presenting a “blatant difficulty” in the fiscal area.

“It has not been a trajectory of progress. It wasn’t until now. I was one of the first to publicly support the framework that Minister Fernando Haddad presented, essentially because what he did was a movement in the opposite direction to what the President of the Republic had been defending. It was admirable. But it’s not working,” declared the former BC president.

“Brazil is neither Venezuela nor Argentina, but there is nothing that signals that we are going to enter a more accelerated and sustainable growth process,” he added.

Lula says he is “irritated” by discussions on tax issues

On Tuesday (7), Lula said he was “irritated” by discussions about the fiscal deficit. According to him, “no country in the world” discusses this issue. “The public debt of the United States is 112% of GDP, that of Japan is 235%, that of Italy is almost 200%. In other words, that’s not the problem. You have to know whether you are spending or investing.”

The president also spoke again about the difference between spending and investment, again using his own criteria. For Lula, the increase in salaries in some sectors of the public sector, to increase the value of civil servants, is an “investment” – although the standard classification of public accounts does not classify it as such. “Since I assumed the Presidency of the Republic, in 2003, I have taught a lesson in responsibility”, he states.