LULA UNDER PRESSURE FROM ALLIES AND COURTS

New Rules

The Chamber of Deputies appealed another Federal Supreme Court (STF) decision on Monday (19/05), requesting that the mandates of seven federal deputies be preserved and that the new rules on “electoral surpluses” take effect starting in 2026. House President Hugo Motta (Republicanos) argued that the STF ruling could create legal uncertainty in the electoral system. In March, a majority of STF justices decided to annul the election of seven federal deputies elected in 2022.

PT Elections

The withdrawal of Maricá’s mayor (RJ) and PT national vice president, Washington Quaquá, from the race for party president on Monday (19/05) reduced the number of candidates for the position to four. Quaquá said he stepped aside to preserve unity within the party’s largest faction, Construindo um Novo Brasil (CNB), which supports former Araraquara (SP) mayor Edinho Silva — considered President Luiz Inácio Lula da Silva’s favorite. The first round of the Direct Election Process (PED) is scheduled for July 6.

Missed Timing

Members of center and center-right parties that formally support the Planalto Palace have downplayed Lula’s long-awaited ministerial reform, claiming that even after a seven-month delay, it is unlikely to improve relations with the government or impact 2026 negotiations. So far, the president has only replaced PT members with other PT members and made changes in two ministries — Communications (União Brasil) and Social Security (PDT) — due to investigations involving the incumbents. Leaders from União Brasil, PSD, MDB, PP, and Republicanos say the government missed the right moment to implement changes that could have strengthened the allied base.

Budget Freeze

The Ministries of Finance and Planning and Budget announced on Thursday (22/5) a R$31.3 billion freeze in this year’s budget. The cut will affect ministries’ “discretionary spending,” meaning non-mandatory expenditures such as investments and operational costs of the public sector. Planning Minister Simone Tebet explained that rising Social Security expenses were a key driver behind the freeze. Details on which ministries will be affected will be disclosed by the end of the month.

Increase in IOF

The government also announced an increase in the Tax on Financial Transactions (IOF), a federal levy on money-related operations such as loans, foreign exchange, insurance, and investments. For loans, the IOF will be 0.95% per contract. For foreign exchange and international spending, the rate will rise to 3.5% on international cards, prepaid travel cards, cash purchases of foreign currency, overseas remittances, and short-term foreign loans.

Less TransparencyThe federal government’s decision to restrict access to certain public agreement records affected about 16 million documents, according to the Ministry of Management and Innovation (MGI). Previously available in the TransfereGov system, these records included work plans, invoices, partnership terms, and accountability reports. Among the restricted files are full data on agreements with NGOs, execution reports, and contracts with companies responsible for public works.

Analysis:

The recent events reflect a moment of institutional strain in Brazilian politics, where the balance of power between the judiciary and legislature is once again being tested. The Chamber of Deputies’ challenge to the Supreme Court’s annulment of seven federal mandates reveals growing discomfort within Congress over the judicial court and the lack of clear transitional rules.

Within the ruling Workers’ Party (PT), internal maneuvers ahead of the July leadership election show the party’s efforts to consolidate power around President Lula’s preferred candidate, Edinho Silva. The withdrawal of Washington Quaquá, a prominent figure within the party’s leadership, reveals a strategy to avoid fragmentation. Simultaneously, Lula’s failure to execute a broader ministerial reform—despite mounting pressure from centrist allies—illustrates the government’s difficulties in expanding its coalition and translating formal support into concrete legislative backing.

Economically, the government’s announcement of a R$31.3 billion budget freeze and a higher IOF tax sends mixed signals. On the one hand, it reflects a pragmatic response to rising social security expenditures and the need for fiscal discipline. On the other hand, it may weaken political capital at a time when Lula faces criticism for inaction and lack of coordination within his coalition.

Sources: O Globo [1], [2], [3]; G1; A Folha de SP.