Lula preaches the role of the State in the economy, calls a ceiling for stupidity and talks about a new labor law

President Luiz Inácio Lula da Silva (PT) made in his inaugural speech a strong defense of the State’s role in the country’s economic development, including through public banks, “especially the BNDES” and “companies that induce growth and innovation , like Petrobras”. The representative preached the recomposition of Budget funds, said that the government will resume stalled works and spoke of a new labor legislation.

The speech, which also included criticism of the spending ceiling and the cut of funds for public policies during the administration of Jair Bolsonaro (PL), points to an economic agenda aligned with the party’s historical flags and the speech of the electoral campaign.

Lula defended budgetary, fiscal and monetary realism, inflation control, respect for contracts and defended public-private cooperation.

Possible changes in the labor law will be negotiated with businessmen, said Lula after the PT said during the campaign that Michel Temer’s reform (approved in 2017) would be revoked and provoked reactions from the business community and parliamentarians.

“We are going to dialogue, in a tripartite way – government, trade union and business centrals – about a new labor legislation. Ensuring freedom to undertake, alongside social protection, is a great challenge in today’s times”, he said.

Lula stated that he will resume paralyzed works in the country – which, according to him, add up to more than 14,000 – in addition to reestablishing the Minha Casa Minha Vida housing program and structuring a new PAC (Growth Acceleration Program) to generate jobs.

In addition, the president said that small and medium-sized companies, entrepreneurship, cooperativism and the creative economy will be promoted. “The wheel of the economy will turn again and popular consumption will play a central role in this process”, he said.

Lula called the spending cap “stupid”, noting that it will be revoked. The measure was already foreseen by the proposal articulated by the government and approved by Congress, which expanded the Budget in 2023 and demanded from the Executive the presentation in six months of a new rule for public accounts to replace the current rule.

He defended the recomposition of funds for areas such as health and education, advocating investments in more universities, technical education, universal access to the internet, expansion of day care centers and full-time public education. He reiterated that the policy of valuing the minimum wage will be resumed and promised to end the INSS (National Social Security Institute) queue.

In addition, he criticized the use of the public machine for electoral purposes, after Bolsonaro approved a PEC (proposed amendment to the Constitution) to boost social benefits in a race year for the Planalto Palace.

“Never have State resources been so distorted in favor of an authoritarian project of power. Never has the public machine been so diverted from republican controls. Never have voters been so constrained by economic power and by lies disseminated on an industrial scale,” said Lula.

Despite the defense of more resources for public policies, Lula has the challenge of managing while maintaining the discourse that there will be fiscal balance. Despite the fact that federal revenue shows signs that it may be underestimated, which provides partial relief for the 2023 accounts, the proposal that expanded spending will significantly expand the gap of BRL 63.7 billion originally projected.

The scenario is complicated by the fact that the government has decided to extend the fuel exemption for 60 days. If it is extended to the whole year, the cost of this measure would be R$ 52.9 billion – although the elected government has signaled that the tax cut will be valid for the full year only for diesel and cooking gas.

The use of public banks also draws attention and has recently received a call from the president of the Central Bank, Roberto Campos Neto —who warned about subsidized credit on interest rates in the country.