Brazil Finance Chief Says Lula Ordered Him to Fix Budget

(Bloomberg) — Brazil’s finance chief said he has received the mission to balance public accounts directly from President Luiz Inacio Lula da Silva, whom many investors see as unwilling to make the painful spending cuts that goal demands.

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“The command I receive from the president is to tidy up and balance public accounts without harming the poor,” Finance Minister Fernando Haddad said at an event hosted by BTG Pactual in Sao Paulo on Tuesday. “Brazil, without economic growth, will not be able to balance public accounts.”

Investors have expressed mounting skepticism about Lula’s commitment to shoring up public finances since late last year, when a much-anticipated package of spending cuts disappointed traders looking for signs that the government would move to curb Brazil’s ballooning budget deficits and growing public debt.

The leftist leader’s declining approval ratings have generated added concerns that he will turn to populist measures to boost his popularity. Lula has announced measures to increase access to credit and bolster social programs in recent weeks.

Brazil’s real weakened as much as 0.7% against the dollar on Tuesday morning before erasing losses as of 11:45 a.m. local time.

“Lula’s push to better publicize the administration’s agenda is likely to add headline risks ahead of the election year, and lingering concerns over the government’s populist agenda likely have weighed on the fiscal concerns,” said Dan Pan, economist at Standard Chartered Bank.

Rising food costs are weighing on Lula’s popularity. The share of Brazilians who rate his government positively fell about seven points to roughly 29% in February, against 44% who see it negatively, according to a new poll commissioned by Brazil’s National Transportation Confederation that was published on Tuesday.

Lula’s personal approval rating fell nine points to 40.5%, while roughly 55% said they disapprove, in line with other surveys that have shown that a majority of Brazilians are unhappy with the veteran president. The poll interviewed 2,002 people across Brazil between Feb. 19-23 and has a margin of error of 2.2 percentage points.

Haddad’s team set a goal of eliminating Brazil’s primary fiscal deficit, excluding interest payments, in 2025, with a tolerance range of plus or minus 0.25% of gross domestic product.