Economic experts are debating the impacts of the attacks from 8 January on the economy. Specialists heard by local media disagree on the consequences that the incident may bring to the government and its management of the economy. This sector has required a lot of effort even before the official beginning of this new administration.
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Great Challenge Ahead
Since November 2022, when Lula’s ticket was announced the winner, the transition team began preparing measures that could solve the crisis of the country’s public accounts, while trying to move forward with a revenue expansion program and tax reform.
Two Perspectives
One group of analysts understand that President Lula’s quick response to the attack and the unified response of the Executive, Legislative and Judiciary branches to deal with the issue gave greater security to the market, which saw in this institutional stability. For them, it would also have represented a political victory for the new government, increasing its power in the Congress and reducing possible resistance from deputies and senators, consequently, increasing the chances of a quick evolution of the economic agenda.
In addition, last week, Finance Minister Fernando Haddad (PT) announced the new economic package, which was well received by the market. It contained the first measures to try to reduce the gap in public accounts and contain the rise in public sector debt.
A final positive aspect that was highlighted by the experts is Lula’s firmer stance, who has been asking his ministers to present results, be pragmatic and less ideological.
Another group of specialists believe that the response to the acts perpetrated by supporters of former President Jair Bolsonaro requires so much attention from the government that it can delay fundamental discussions on fiscal policy and the negotiation of reforms in the National Congress.
They also think that the attacks in Brasilia raise risk perception in Brazil in the short term and may alienate foreign investors. The scenario ends up being worse for them, who are less able to evaluate everything that is happening due to the distance. Still, for the experts, there will not be a complete flight of capital, but the incident will likely make investors to have a mor cautious attitude.
The more liberal profile of this Congress in Lula’s third term may represent a firmer opposition, hence, few political gains from the episode and not necessarily greater chances to approve the economic agenda.
With that in mind, for this group of analysts, the government’s must to respond to the incident by implementing of a robust fiscal anchor, to reduce the sense of risk. It must also pay attention to the fuels prices, an subject that has constantly brought instability through strikes, protests and inflation. Furthermore, economic authorities cannot revoke the Social Security and the labor reforms.
