The Minister of Finance, Fernando Haddad, canceled his return to São Paulo scheduled for this Friday (8) to resume negotiations on the package of measures to cut public spending. A new meeting with the presence of President Luiz Inácio Lula da Silva and ministers from the affected areas will take place from 2pm this Friday (08), at Palácio do Planalto.
Haddad had signaled, earlier this Thursday (7), that the announcement would be scheduled for next week, but the government is under pressure from the financial market to quickly present measures to balance public accounts.
After Haddad’s speech, postponing the announcement, the stock exchange’s stock index, B3, which was on the rise, retreated and closed down 0.5%, at around 129 thousand points. The dollar rose 0.3%, at R$5.69.
Noise about the values of the measures to be announced also contributed to the poor performance. The financial market’s expectation is a minimum cut of R$50 billion.
According to government sources, Lula has already been convinced of the adjustment, as the situation of public accounts will culminate in an increase in interest rates to contain inflation and, consequently, a drop in his popularity.
A package approved by Congress in 2025 would help the dollar and inflation fall, paving the way for a possible interest rate reduction and a more favorable economic scenario in 2026.
In an interview with RedeTV This Thursday morning, Lula showed his discomfort with the need for adjustment and poked at Congress and economic sectors.
“I am in the process of a very serious discussion, because I know the market discourse well, the speculative greed of the market”, he added. “Will businesspeople who live off government subsidies accept giving up a little subsidy so that we can balance the Brazilian economy? Will you accept? I don’t know if they will accept it.”
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Minimum adjustment policy is left out
Crucial points for balancing mandatory expenses, which consume more than 90% of the budget and impede discretionary expenses such as investments and machine costs, are not being addressed.
A change in the policy of valuing the minimum wage above inflation is ruled out. The practice causes a sharp increase in related expenses, such as retirement, pensions, salary bonuses, unemployment insurance and Continuous Payment Benefit (BPC).
Among the proposals on the negotiating table is the de-indexation of these benefits from the minimum salary.
Furthermore, the economic team suggests making the rule that provides for constitutional health and education minimums more flexible.
With the end of the spending cap, these expenses – which had been adjusted for inflation – were once again linked to percentages of revenue.
Thus, the Lula government has set itself a trap, since such expenses end up growing above the global spending limits foreseen by the fiscal framework – according to which total expenditure cannot rise by more than 2.5% in real terms.
According to the Constitution, education must receive 18% of net tax revenue (RLI) and health, 15% of net current revenue (RCL).
Lula has already stated that he is against cuts in these areas as well.
