Defense of democracy strengthens Lula, but government will need an agenda at the center, say economists

The response given by the institutions to the coup attacks on democracy in Brasília on Sunday (8) should reassure the economy and reduce the impacts of the destruction of the symbols of the three Powers caused by extremist militants, evaluate economists interviewed by the Sheet.

Even regretting the depredation of public property and the image of disorder in the country that circulated internationally, their perception is that the act will have the opposite effect to what the coup plotters expected.

Solidarity between the Powers should strengthen the figure of President Luiz Inácio Lula da Silva (PT), reducing the opposition’s space to hinder the progress of the economic agenda. To maintain this unity, the government, however, will need to approach an agenda more to the center than to the left — which it has been aiming for so far.

“What became clear is that the speech attacking democracy is explicit on the extreme right, it is something that, in some way, even weakens the opposition movement to the Lula government, helps to unify the democratic discourse and gives more support to the government. “, says Silvia Matos, coordinator of Boletim Macro and researcher at Ibre FGV (Brazilian Institute of Economics, Getulio Vargas Foundation).

The economist makes a parallel with the invasion of the Capitol, in the United States, about two years ago, when protesters against the victory of Democrat Joe Biden invaded the US Congress.

“We’ve already been through a similar event and we’ve seen that it’s a completely destructive group. The economy doesn’t flourish in chaos, that’s why it’s so important that we see a reaction from society and institutions to neutralize extremism.”

She considers that the union around the defense of democracy should raise the broad front character of the government, taking the economic policy more to the center, in search of stability. The Minister of Finance, Fernando Haddad, should maintain the discourse of fiscal adjustment and deficit reduction, he assesses.

“The economic team has a greater challenge now, having to follow a framework more from the center than from the left: concerned with the social, but knowing that without fiscal there is no social. We are going through a period of low growth, with high inflation and unfavorable external scenario.”

“Since the response has been blunt, the trend of impact on the economy is not so great, it should not affect country risk or lead to capital flight. There is a perception that we have reached the limit and that Bolsonarism has changed levels, being necessary to make all the mess come to an end”, agrees the chief economist of MB Associados, Sergio Vale.

He says he believes that the need for unity to defend democracy ends up slipping into the government’s economic policy project. “Sunday’s stress could make the government have the perception that it will need to make a fiscal adjustment to avoid any climate of attrition. It could help the idea of ​​fiscal responsibility to materialize.”

The economic team’s schedule could also be compromised, since the unfolding of the coup acts will take time for Congress, he says.

INVESTOR WILL FOLLOW THE GOVERNMENT’S REACTION

In the assessment of economists, investors are attentive and should continue to be concerned about political instability, but there should not be a flight of capital or an increase in risk at first.

Throughout this Monday (9), the market reacted calmly, with the Ibovespa (the main stock exchange index) operating in a stable manner. For analysts, this is also due to the response given by Brazilian institutions, in line with democratic rules.

In the evaluation of UnB (University of Brasilia) professor José Luis Oreiro, there may be an increase in uncertainties in the short term, which unfolds in terms of increased future interest rates and more uncertainty on the part of investors.

“In the medium and long terms, it is necessary to assess the political impact on President Lula’s management. There seems to be a certain consensus that he is strengthened and that the demonstrations stamped the most staunch opposition to the government as supporters of terrorism. with the opposition becoming softer than imagined.”

Oreiro also assesses that Haddad’s plans, to carry out a tax reform and present a new fiscal framework to replace the spending ceiling, should be maintained and can be facilitated.

“The honeymoon period should be extended and may facilitate the approval of the tax reform, if the government manages to approve it in the first semester, it will have scored a great goal.”

Claudio Considera, from Ibre FGV, points out that the acts of the vandals will have a negative impact, leaving investors afraid that the government will not be able to maintain peace and order in the country, if new camps are installed in front of the barracks and roads are blocked. again blocked.

“In the medium term, a guarantee is expected that something similar will not happen again, the country needs to function. and arrest those responsible, to ensure that the law is being respected and that the damage is not even greater.”

For Ilan Goldfajn, president of the IDB (Inter-American Development Bank), the violent acts against democratic institutions in Brazil are an attack on democracy, and therefore on everyone in the region. “We stand together with the Brazilian people and their institutions in defense of democratic values, peaceful transitions and the rule of law,” he wrote on his Twitter profile.

Also in her profile on the social network, economist Monica de Bolle pointed out that the comparison of what happened last Sunday in Brasília with the acts in the US Capitol blurs the perception of the gravity of the moment, in which security forces were corrupted by the Bolsonarism and there are financiers with great purchasing power allying themselves with the coup.

“Understand that the set of what we call the market does not tend to be frightened by coups d’état. And this is not exclusive to Brazil. Just look at the history of the 20th century and contemporary history. I am devastated and extremely worried.”