BRASÍLIA, March 19 (Reuters) – Finance Minister Fernando Haddad leaves command of the ministry this Thursday after more than three years of a management that promoted changes in fiscal rules, fought tax benefits and increased taxes in defense of greater taxation for the richest and relief for the poorest, now leaving the post to his current executive secretary, Dario Durigan.
His departure from the position was confirmed by Haddad at an event in São Paulo this Thursday, where President Luiz Inácio Lula da Silva also announced Durigan as the new Minister of Finance.
At another evening event at the Metalworkers Union, in São Bernardo do Campo (SP), Haddad should present, alongside Lula, his candidacy for the government of São Paulo in this year’s elections, with the mission of giving a solid platform in the State to the president in his re-election campaign.
Current number two in Finance, Durigan will take office with a Budget compressed by mandatory spending and will have the challenge of negotiating the economic agenda with a National Congress cornered by the fraud scandal involving Banco Master and in the middle of the electoral period, which historically leads the Legislature to reduce the pace of activities and resist fiscal adjustment measures, which are generally unpopular.
He assumes command of the department at a time of greater uncertainty in the face of the military conflict in the Middle East, which tends to put pressure on inflation with the rise in oil prices and led the government to adopt tax relief measures, with the complex scenario increasing the Central Bank’s caution in its plan to cut interest rates.
Among the priority agendas negotiated by Haddad and which remain pending are the limitation of super salaries in the public service, reform of military pensions, economic regulation of “big techs” and microeconomic standards.
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The Treasury must also send to Congress a project that regulates the new Selective Tax, created in the tax reform on consumption to affect goods and services that are harmful to health and the environment.
With a degree in Law, Durigan worked at the Attorney General’s Office, Civil House and City Hall of São Paulo, and was director of public policies at WhatsApp before taking up the position at the Treasury in 2023 in place of Gabriel Galípolo, who left the department at that time to become director of the Central Bank.
Responsible for interlocution with the Finance secretariats and organizing the department’s work, the executive secretary played an important role in the negotiations of economic measures with Congress, also having approached Lula.
Haddad, in turn, left office to run in the elections for the governor of São Paulo after repeatedly stating that he had no desire to run for public office and emphasizing that he wanted to collaborate with the campaign for Lula’s re-election. This will be his second candidacy for state government, after being defeated in 2022 by Tarcísio de Freitas (Republicans), who will seek re-election.
Haddad also lost the presidential election in 2018 and was unable to be re-elected as mayor of São Paulo in 2016, after being elected to the position four years earlier, the first time he ran for elected office.
At the head of the economic team of the PT president’s government, Haddad began coordinating measures during the government transition, at the end of 2022, when he managed to approve a constitutional amendment that released social spending and investments outside fiscal rules.
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Already in the minister’s chair, in 2023, he proposed replacing the public spending ceiling rule, which had been in force since President Michel Temer’s government, with a new framework based on fiscal targets and which allows real growth in spending, as long as it is at a slower pace than revenue.
Taxes
Given the high dependence on revenue measures for the rule to be sustained, a characteristic criticized by market agents, the minister placed the fight against tax benefits as a priority for his management, also proposing a series of tax increases.
In more than three years of operation, he managed to approve cuts in payroll tax relief for sectors of the economy and benefits for the events sector created during the pandemic and, more recently, a linear reduction in non-constitutional tax incentives.
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Under his command, taxes on fuel, sports betting, international purchases, exclusive and offshore funds, electric vehicles, fintechs and Interest on Equity (JCP), among others, were also created or raised.
In a more modest spending-cutting agenda, criteria for social benefits and salary bonuses were revised. A brake was also created on the real growth of the minimum wage, which had previously been boosted by Lula’s own government.
Haddad was also at the forefront of negotiations for the tax reform on consumption, approved after decades of discussion, and the Income Tax reform, which exempted those earning up to R$5,000 a month — a campaign promise from Lula — and established a minimum tax of up to 10% on people with higher incomes.
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Under the minister’s management, the country’s public debt grew — from 71.4% of GDP in January 2023 to 78.7% of GDP in January this year — and, according to National Treasury projections, it will continue on an upward trajectory in the coming years. Haddad, however, maintains the defense of the framework for public accounts and attributes the movement mainly to the level of interest in the country, which increases the cost of rolling over the debt, and also to the fiscal legacy he received from the government of former president Jair Bolsonaro.
