Brazil fiscal stance to be reaffirmed as Lula plans TV address
Brazil's president-elect Luiz Inacio Lula da Silva is expected to use a televised address on Sunday to reinforce his commitment to budget discipline as investors watch for signals on his economic agenda. The speech is not expected to include specific policy measures, but it is set to outline broader priorities for his new term beginning in January.
Highlights
- Lula will deliver a televised address reaffirming fiscal commitments but will not detail concrete measures to achieve surplus targets.
- The fiscal plan targets a primary surplus of 1.3% of GDP by 2030 versus a projected primary deficit of 0.4% of GDP for this year.
- Brazilian assets have weakened since Lula's October 25 reelection, with currency declining and interest rates rising due to investor concerns over policy direction.
Planned address and fiscal message
As reported by Reuters, two sources with direct knowledge of the matter say Lula plans to deliver the speech without detailing concrete steps, focusing instead on wider economic goals and other priorities for the administration that starts in January.During the presidential campaign, Lula's advisers say he would commit to meeting the increasingly ambitious primary surplus targets laid out in budget guidelines sent to Congress earlier this year. The plan envisages an effective primary surplus of 1.3% of gross domestic product by 2030, compared with a projected deficit of 0.4% of gross domestic product this year.
Even so, limited detail has been provided on how that fiscal adjustment would be achieved as mandatory public spending rises rapidly and election promises add to expected costs.
Market pressure and investor concerns
Since Lula's surprise reelection on October 25, Brazilian assets have come under pressure, with the currency weakening, stocks falling and market interest rates rising sharply.Markets are more stable on Wednesday as Democratic gains in U.S. midterm elections support global risk appetite, but uncertainty over Lula's policy team, including his choice for finance minister, continues to unsettle investors.
Our earlier article on the Ibovespa’s post-election slide highlighted how political and fiscal uncertainty after Lula da Silva’s re-election weighed on Brazilian equities and kept risk appetite fragile. We also noted that the index was trading below key moving averages with bearish momentum, as losses in heavyweight stocks added to downside pressure and left traders focused on nearby support and resistance levels.
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