Tax reform should be a priority in an eventual new Lula government, says former minister

The economic policy of a possible new government of former president Luiz Inácio Lula da Silva (PT) should be directed towards combating poverty, but also focusing on advancing the agenda of economic reforms.

According to Nelson Barbosa, finance minister in the government of former president Dilma Rousseff, if the PT member wins the 2022 elections, his first year in office must be used to address important changes in the structure of the country’s onerous public machinery.

A tax reform that can help unlock potential economic growth for 2023 and 2024 was identified as one of the priorities within the candidacy agenda of former president Lula.

“Lula is an experienced leader, who can deal with political pressures, while it seems that the [presidente Jair] Bolsonaro [sem partido] he doesn’t want to be the president, he doesn’t want to make the decisions. I think it will be a complete tragedy if he [Bolsonaro] is re-elected,” said Barbosa, during an event of investment bank Bradesco BBI this Tuesday afternoon (16).

The former minister said that the Brazilian economy has the potential to grow around 3% a year, without creating major inflationary pressures. Many investments in the private sector have been delayed by uncertainty about the country’s political picture ahead, but that should be resumed when there is greater clarity on the horizon, said Barbosa.

“If things get less chaotic, many projects, even in the private sector, can be implemented, and we can accelerate growth in 2023 and 2024,” said the former minister, who said he has been participating in discussions around the economic platform of the PT candidacy.

Former BC (Central Bank) president Gustavo Franco stated that expectations regarding a period of high volatility in asset prices in the market in the coming months due to the elections could end up disappointing many people.

He headed the monetary authority from August 1997 to March 1999, during the Fernando Henrique Cardoso administration.

“Every time people say there will be volatility in the foreign exchange market, [essa volatilidade] already happened. Markets are faster than you might imagine. So maybe we don’t see much more volatility from now until the elections, because we’ve already seen this volatility happen. The markets are anticipating,” Franco said during the bank’s event.

Christopher Garman, director of the Americas at political consultancy Eurasia Group, said the base scenario he works with points to a second-round dispute between Lula and Bolsonaro, with the former president’s victory being the most likely outcome today.

Garman also stated that he hopes that the PT’s speech bears some resemblance to what was observed in the recent electoral process in the United States, in which American President Joe Biden followed a line towards the political center, with a view to unification.

“I believe the best script [planejado pelo PT] is to present Lula as a candidate who can unify the country, against an administration that they will say has divided him,” said the expert.