Credit Suisse predicts Lula victory and pragmatic presidency

Credit Suisse bank is betting on a victory for former president Luiz Inácio Lula da Silva (PT) in the 2022 presidential elections.

In a report published this Thursday (17th), signed by economists Solange Srour and Lucas Vilela, the Swiss bank predicts the ex-president’s victory against his main opponents and outlines what investors should expect from an eventual third term of office. PT.

“Former President Lula must implement changes in the labor market that increase workers’ social protection and favor collective agreements. In addition, he must suspend the privatization and concessions agenda for the private sector and increase the participation of state-owned companies in the market. “, says the Credit Suisse report.

Also according to the bank’s economists, in areas such as education, health and the environment, the former president’s priorities should move towards restructuring government bodies that were modified by the Jair Bolsonaro (PL) government.

“Some points, however, tend to converge between the two candidates [Lula e Bolsonaro]: social benefits to reduce poverty and income inequality must be maintained or even expanded, and the tax framework must be changed, with the creation of taxation on profits and dividends”, economists point out.

They say they still do not expect any of the two candidates to completely abandon their commitment to a responsible fiscal agenda.

“If they do, we believe the country would enter an even deeper recession than is likely to occur in 2022, reducing the president’s approval rating and his ability to govern.”

Credit Suisse economists say that the president to be elected will need to anchor the expectations of economic agents, with indications that public accounts will be stabilized later on, in order to avoid the devaluation of the real and the increase in inflation and the interest rate. fees.

“The consensus now is that, if Lula is elected, he will be pragmatic, with the approval of reforms and with some progress in the fiscal consolidation process as in 2003”, economists predict.

“Lula is likely to reassure investors about Brazil’s ability to stabilize debt in the medium and long term.”

They also say that, unlike in 2002, a PT victory this year should not be accompanied by a “letter to the Brazilian people”, a text in which Lula assured at the time that he would keep public accounts and inflation under control.

“This time, there will be no such letter, but the fact that the former president is waving to the center-right and right-wing parties gives us confidence that he will adopt a pragmatic stance.”

Also according to economists at the Swiss bank, Lula should not adopt an extremely pro-market stance, but neither will he guide the fiscal agenda in a way that leads the country towards insolvency.

“If Lula wins by a wide margin and economic agents do not exert much pressure, with a stable exchange rate, moderate future interest rates and low credit risk, then he will probably govern with a coalition similar to that of his second term and there will be less incentive for the adoption of a pro-reform agenda.”