‘I was the 1st mayor to achieve investment grade in the country’, counters Haddad about distrust of the market

Appointed future Minister of Finance by President-elect Luiz Inácio Lula da Silva (PT), Fernando Haddad used his career as mayor of São Paulo, from 2013 to 2016, to counter the misgivings of the financial market about fiscal responsibility.

“Look at the ‘investment grade’ [espécie de nota de bom pagador dada por consultorias] of São Paulo City Hall: I was the first mayor to achieve investment grade in the country. If you don’t look at the person’s trajectory, you will fall into fake news. Why more fake news? The stage of fake news is over “, said Haddad, in response to what he would say to those who fear a “spending minister “, as seen by a wing of market analysts.

This Thursday, at an Itaú event, economists such as Luis Stuhlberger, CEO of Verde Asset Management, stated that Brazil’s credit rating may suffer a further downgrade in view of the expectation of increased spending with the PEC (proposed amendment to the Constitution) of the Transition and an economic policy focused on increasing credit via public banks.

Stuhlberger stated that the new president is signaling an economic policy that will result in higher interest rates and inflation and low growth. In a letter to investors, he had already called the PEC of the transition “PEC of Spending”.

At the head of the economic portfolio, Haddad says that the resumption of international agreements, the definition of a new fiscal framework (rules to avoid an increase in public debt in relation to GDP), replacing the spending ceiling, and tax reform are priorities for the new administration.

“The important thing is for us to have a strong agenda for 2023, to recover the international agreements that are at a standstill, especially the European Union, the issue of the fiscal framework and the issue of tax reform, as our major movements”, he said.

The future Minister of Finance said he was open to receiving proposals for the new fiscal framework, saying that it is not a “rule of one person”, but of “Brazilian society”. Today, with the spending cap, the spending cap is corrected for inflation.

“I intend to receive proposals, of course, and not just from the transition. I will listen to technicians from the Treasury, academia, economists whom I trust,” he said.

In recent months, at least three proposals for a new fiscal rule have already been released, one by the Treasury, another by the Secretary of Finance for the state of São Paulo, Felipe Salto, and collaborators, and a third by economists and columnists at Sheet Arminio Fraga and Marcos Mendes.

According to Haddad, the new fiscal framework will come out in 2023. “It will come out next year, we even have a deadline in the Constitution to make the fiscal framework,” he said. The petista also stated that it can be created together with the tax reform.