Opinion – Vinicius Torres Freire: Haddad’s speech shows that Lula 3 still has no economic direction

No sensible person expected Fernando Haddad to attend the bankers’ annual luncheon to deliver a finance minister speech or to announce concrete policy guidelines for spending and debt in the Lula government 3.

That’s what the financial executives who went to the Febraban lunch on Friday said. What caught the attention of several of these people was:

1. Haddad gave no sign that Luiz Inácio Lula da Silva has anything to say different from what he has been saying since he kicked ass on the idea of ​​controlling public debt;
2. Haddad spoke of tax reform, default and stability in order to occupy time, so as not to deal with any thorny subject;
3. Haddad had no autonomy for anything, “he spoke less than the transition team in the economy”; it was to represent Lula in the most “neutral” way possible, which is “understandable”, but insufficient;
4. Haddad said that the “quality” of public spending needs to improve, which nobody disputes. But because he was “silent” about the “quantity”, he gave an “uncomfortable signal”.

Angrier people said that “Haddad and the PT are out of touch with reality”. That the PT government is still “lost or going to follow what Lula said after the election”.

More analytical people, so to speak, claimed that the government’s time to publish the guidelines for an economic program and appoint a team is running out. Even so, these more neutral people say that, without a team, “it’s no use speculating” and that “it’s still possible to fix everything, you just need to want to”.

Within the PT and even in finance, there are pro-Haddad lobbies and those in favor of Alexandre Padilha at the Treasury. They plant news and comments in favor of one or the other. Owners of money would really like a standard and highly regarded economist, a “liberal”. If not, a “PT politician” who would appoint a “liberal” team.

The nomination of the team would indicate what is going to be done in terms of the central economic problem at the beginning of Lula 3. That is, what is the initial increase in federal spending, and would provide a guideline for controlling the pace of indebtedness (a “target ” for the public debt and the expenditure definition rule that will be used in order to reach this target).

Depending on the size of the “Transition PEC”, this pace could be explosive or, at least, could raise interest rates and the dollar, harming growth.

Lula insinuated that this is not a central problem. Haddad did not say anything that could attenuate the speeches of the president-elect.

In an interview with Alexa Salomão, this Sheet, Pérsio Arida, from the transition team, was more informative. He pretty much buried the illusion that he could go into government. He summarily told what he proposes about the size of the “license to spend”.

It is not the opinion of the transitional government for Lula 3. But it is the opinion of a person concerned with the indebtedness and who seeks to advise the president-elect. That is, it is there to try a realistic solution in social, political and economic terms.

What does Arida propose?

1. Federal spending in 2023 should be the same as in 2022, relative to the size of the economy, of GDP;
2. If the GDP grows by 2.5% next year, the “license to spend”, spending beyond what is foreseen in the proposed Budget for 2023, should be around R$ 135 billion (the draft of the “PEC da Transição” now foresees BRL 198 billion). It is the same number already suggested by Nelson Barbosa, from the economic transition team and Dilma Rousseff’s finance minister;
3. The “license to spend” lasts as long as there is no new fiscal rule, which in theory will define limits for federal spending: a maximum of two years. If there is a new rule in 2023, to take effect in 2024, the “license” ends in 2023;

Assuming that the GDP grows less than 2.5% in 2023, the extra spending should be less than R$ 135 billion, says Arida. For the time being, a forecast for a GDP increase of 2.5% is very optimistic (for the time being, estimates are around 1%).

It’s a way to go about the discussion. However, the command of the “transitional government” for Lula 3 did not make it public to give any guidelines. Neither did Haddad’s speech.