Haddad will seek fiscal responsibility at the Treasury, says Eurasia

The possible choice of Fernando Haddad for the Ministry of Finance may not have the approval of part of the financial market, but the former mayor and former minister must seek a balance between the need for more spending and fiscal responsibility, says Christopher Garman, director for the Americas of the Eurasia Group.

“I still believe that Haddad’s name will try to find a balance and look at debt sustainability,” he said during a debate at the Macrovison event at Itaú Unibanco this Thursday (8).

The expectation is that the president-elect Luiz Inácio Lula da Silva (PT) will confirm Haddad’s name for the Treasury this Friday.

Garman also stated that the expenses foreseen by the PEC (proposed amendment to the Constitution) of the Transition to 2023 should be below the R$ 168 billion approved in the Senate, something that was signaled in conversations with members of the transition team in Brasília.

“What I hear within the transition team is that the expectation is to spend from R$ 120 billion to R$ 130 billion next year. It is one thing to ask for space to spend, another is the concrete expense”, he said.

For him, this “will not be a government that will throw fiscal responsibility in the trash”, although the PT may be adopting a policy that prevents the Central Bank from reducing interest rates and promoting more robust growth, given the fiscal uncertainty.

If the economic growth expected by the party does not materialize, a loss of popularity and support in the Legislative cannot be ruled out, consolidating an environment and a short honeymoon for the new government, says the executive.

Still on Haddad, Garman said he believes that the former mayor of São Paulo will bring names with market approval to the ministry.

In the same debate, Fábio Zambeli, chief analyst at Jota, stated that the ability to articulate with Congress is not a characteristic of Haddad, recalling the warlike relationship between the Legislative and the PT in the São Paulo city hall. But he mentioned that the former mayor had responsible fiscal management and chose a technician, Marcos Cruz, a partner at McKinsey consultancy, for the Finance portfolio.

In another panel at the same event, former BC president Affonso Celso Pastore also mentioned the possible fiscal-monetary conflict that is looming for the next administration, which makes the work of the monetary authority more difficult.

“With a fiscal authority that believes that growth only comes with public spending, you accentuate that conflict,” Pastore said.

Also former president of BC Gustavo Franco said that the possible reappointment of the current president of the institution, Roberto Campos Neto, who has a mandate until the end of 2024, is good news. The information was published by Panel SA of Sheet during the holding of the event.

He stated, however, that this scenario may not materialize if the country enters a fiscal crisis that forces the institution to raise interest rates again. Franco stated that the March Copom (Monetary Policy Committee) meeting will be the first in which the Central Bank will have a clearer view on the subject.

“If the outlook for fiscal risk in March is looking bad, Roberto will have to raise interest rates. Then I want to see if there will be a reappointment.”