Henrique Meirelles chaired the Central Bank under Lula 1 and 2 and was Minister of Finance under Michel Temer, the “putschist” of the PT members. Without suspicion, he said that when he wanted to evaluate his work, he consulted the market: price in dollars, stock market and future interest rates.
On Friday (5), with the announcement of Flávio Bolsonaro’s candidacy for president, these indicators suddenly deteriorated. The market has priced Lula’s chance of regaining command in 2027.
Over the weekend, the National Directory of the Workers’ Party distributed to the leadership of the PT the document “Political Resolution”, with proposals that must be approved at the VIII National Congress of the party, in April. Anticipated by Poder360, the text doubles the bet which sends shivers through the market.
“Our program must articulate the role of the State as a driver of development,” says one excerpt, and confront “rentism, which concentrates income and limits growth,” another. He also affirms that the PT must contain the privatizations of public companies.
From the end, between 2022 and 2024, the net profit of state-owned companies under Lula fell by more than half, from 275 billion reais to 116 billion reais. Excluding state-owned banks and Petrobras, the deficit this year through October stands at 6.35 billion reais – a result close to the worst result in history.
Regarding rent-seeking, 7 of the 9 members of the Central Bank management were appointed by Lula, including the president. This year, 1,000 billion reais in interest will be transferred to the “rentier” minority. This is the same amount paid to 41 million INSS beneficiaries.
This brutal concentration of wealth also does not correspond to the promise of “income distribution” contained in the PT document and results from maintaining the Selic at 15% per year to contain inflation generated by excessive spending and budget deficits under Lula 3.
Finally, without anything exceptional happening (as was the case with the pandemic), Lula 3 should end with a gross public debt approximately ten points higher than when he came to power, at more than 82% as a proportion of GDP. This is due to both high interest rates and non-compliance with the budgetary rule that he himself created and on which he takes “extraordinary” expenses at all times.
With this combination of weakened public enterprises, persistent deficits and discredited budgetary rules, the question arises: how will the state induce development?
The answers that have already been given are deficits and increased public debt – which tend to put pressure on the dollar and interest rates and cause the stock market to fall.
This is what happened on Friday, in an acute and concentrated manner.
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