Opinion – Vinicius Torres Freire: The transitional government for Lula 3 took a step bigger than the leg

The “transitional government” of Luiz Inácio Lula da Silva took a step too far by proposing, without planning, an extra spending of almost BRL 200 billion in 2023. This is what becomes evident every day of negotiation or confusion of the “Transition PEC”.

Before throwing this PEC into the lake of sharks in Congress, it would have been prudent to have at least an economic council, a pair of specialized advisers who made the basic projections of how much can be spent without causing socially and economically counterproductive turmoil.

That is, advice to fit the PEC into the general lines of a fiscal program, adapting both its size and indicating the general guideline to contain indebtedness. He didn’t even need to be a finance minister (although it would help a lot) and, even less, to have a new fiscal rule ready, which is now unfeasible.

None of this happened, even though it was clear that it would be necessary to “govern” immediately after the election. Yes, this imperative is indeed an aberration, but it’s what we have: the risk of further ruin if we don’t act quickly.

Lula would not convince many people in Congress with these numbers and plans. But she could gain allies, instead of quickly losing so many people who joined his candidacy. That was the idea of ​​the front, of the socioeconomic and, later, party coalition to give strength to the country’s reconstruction program. This front has already lost several teeth.

In addition to the “economic council” (an executive group of economists), a more tidy political articulation would be needed. We now see that this also did not exist.

The PEC caused economic upheaval. Interest rates in the financial market took an ugly leap since “Lula Day”, November 10, and continued to rise. Now, the broth has also spilled from the political pot. There were changes in the council and in the team of political negotiators. They are changing midfield in the middle of the Cup.

Parliamentary leaders have already told Gleisi Hoffmann, president of the PT, and Geraldo Alckmin, vice president-elect, that they want to approve the minimum: a PEC with lower spending and a “license to spend” only in 2023, as already written in these columns.

Of course, much is still negotiable, but Lula 3 will have to hand over more power in Congress and Executive positions in order to guarantee something close to what he dreamed of with the PEC – and without guarantees even of a Bolsa Família out of the ceiling for four years. This, let’s always remember, is a discussion that may become irrelevant, depending on the new rule of expenditure, deficit and debt control.

When people say and write these things, they are beaten in the usual way. “Let the man [Lula, agora] work”. “The government hasn’t even started”. “Everything will be different, without a market [ou liberais, ou especuladores etc.] commanding”.

Yes, the government can still do a lot. We, who are here, hope so. You can also shoot yourself in the foot even before you start and limp until 2026.

The very ugly situation in the financial market (high interest rates, expensive dollar, etc.) can improve (or worsen) quickly. It will scarcely leave a scar if there is even a guideline that the thing will work. That is, that the debt will not rise without limit.

Debt will rise without limit if there are continued deficits. That is to say: if it is necessary to borrow more and more in order to finance spending, “social” or otherwise, and the rolling over of unpaid interest. It rises even more if the interest charged by creditors becomes steeper, which further increases the relative size of the debt because the economy does not grow.

There are those who say that you can ignore creditors (or set interest rates or not pay the debt at all). It’s shooting a bazooka in the middle of the forehead.