With Alckmin as Lula’s deputy, we can have a more pragmatic government, says economist at Rio Bravo

Brazilian assets should still be penalized this year, as is typical in an election period, but some initial signs of presidential candidates about fiscal anchor and prices already discounted may limit the upheavals throughout 2022, evaluated this Thursday (20th) the economist at manager Rio Bravo João Leal.

Even external factors, especially the likely start of monetary tightening in the United States amid high inflation, seem to be more in the price, thus softening any further impact on domestic markets, said the economist.

For Leal, the focus of investors today is on indications of how the future president of the Republic will deal with a “hard” budget constraint in 2023.

The economist said that the nods made the day before by former president Luiz Inácio Lula da Silva to potential allies from traditionally rival political camps sent a positive signal to the market about more responsible management of public accounts, but that there is still “mismatched” information on the subject. from economists close to PT.

“Yes, maybe the situation of public accounts next year… there will be fiscal responsibility management, with Lula bringing in Geraldo (Alckmin) as vice president. Maybe, if Lula is elected, we will have a more pragmatic, more close to what 2002 was.”

Lula has remained the leader in the most recent polls of intention to vote for the Presidency of the Republic, followed by the current Chief Executive, Jair Bolsonaro, who is now grappling with demands from categories of the civil service for salary readjustments. The Minister of Economy, Paulo Guedes, maintains the defense that no salary readjustment is granted to any category of civil servants.

“Our base-scenario is of a market that will still operate under electoral tension in the year. It may be, however, that this tension is historically lower, once the presidential signals confirm a fiscal responsibility management”, said Leal.

In this context, with higher interest rates and much of the bad news priced in, Rio Bravo even sees a slightly more appreciated exchange rate at the end of 2022, with the dollar at R$5.50, compared to R$5.5735 at the end of 2022. of 2021.

The dollar in sight fell to R$ 5.42 this Thursday (20), after a sharp drop the day before.

“Rising interest rates in Brazil should create opportunities in fixed income, while caution in equity assets should prevail, despite current price levels showing cheap assets,” Rio Bravo said.