Little was known about his economic policy during the electoral campaign and now, almost three weeks after he took office, practically the same is known.
Luiz Inácio Lula da Silva took the Presidency of Brazil for the third time on the first day of the year with the promise of eradicating poverty that currently afflicts 28% of the population.
This generated distrust in the markets, which fell in the first days of his government, putting Lula on a tightrope.
The president must find the balance between the confidence of the private sector and his popularity.
The president's fixation with poverty is neither new nor random.
The last few years, from 2019 to date, have been of aggressive economic fluctuations for Brazilians.
The covid-19 pandemic plunged the country into one of the worst recessions in its history, for which the Administration of former President Jair Bolsonaro embarked on an aggressive monetary transfer program that momentarily removed 15.3 million people of poverty, according to data from the World Bank (WB).
"Unfortunately, the economic recovery of 2021 in Brazil [with a growth of 4.6% in real terms] could not prevent a rebound in poverty," WB specialists wrote in a document published in October last year.
“The economic recovery was not accompanied by a strong recovery in the labor market, since economic growth was led by the subsectors of industry and services, which are relatively low labor intensive.
At the end of 2021, fewer people were actively participating in the labor market than in the fourth quarter of 2019."
The reduction in the government's anti-poverty pay called Emergency Aid and high inflation pushed poverty back up to pre-pandemic levels.
In 2021, around 28.4% of Brazilians (or 60.5 million people) were poor, the World Bank estimates.
Lula, during his first two terms as president between 2003 and 2010, significantly reduced poverty, so his promise to do it again propelled him into the elections.
But times have changed and Lula does not have the same room to maneuver that he had before.
Under Bolsonaro and especially in the final stretch towards last October's elections, the government spent well above what the fiscal ceiling allowed, which for years kept public finances healthy.
Now, Lula will have to continue spending on social programs to attack poverty and return finances to their equilibrium point.
The new Economy Minister, Fernando Haddad, of the Workers' Party (PT), announced last Thursday some measures that, he assured, will put the country on a path towards a reduction in the primary deficit, which refers to the balance between income and the current expenses of a Government, excluding interest on the debt.
The measures include changing the rules by which companies generate tax credits, to collect more taxes and the renegotiation of the tax debt that would allow the government to impose fines and generate interest on the accounts.
Haddad also promised to spend below what Congress has allowed the government this year and will seek approval of a tax reform by June.
This was well received by the private sector and markets stabilized, but it's not really a clear guide to how the government will prioritize social programs without sacrificing much-needed public investment, says Carlos Nepomuceno, an analyst at the consulting firm Eurasia in Brazil.
"What the government is saying is 'first we will focus on this and then we will propose a new fiscal rule for the future,'" says Nepomuceno.
This new prosecutor is expected to be announced between April and May and must be approved by Congress.
“The message that the Lula government wants to send is: 'our record will be fiscally responsible, they have nothing to worry about.'
But their communication has been bad”, considers the specialist.
Haddad's weight as economy minister remains to be seen, as one of President Lula's first decrees was to extend subsidies for fuels such as gasoline and ethanol against Haddad's advice.
In addition, Eurasia analyst Nepomuceno points out, the economic outlook for Brazil this year could complicate its plans to restore public finances.
The country is expected to undergo a sharp slowdown, growing only 0.8% according to estimates by the World Bank.
"Lula's rhetoric is critical of markets, investors and banks to appeal to a leftist electorate, but in his previous presidency we saw that Lula is, above all, a pragmatist," says Nepomuceno.
"It's very important that his is not too abrupt an exercise in austerity, and we think he understands and appreciates the need for private investment."
“This will probably be his last term for the presidency,” Nepomuceno points out, referring to the fact that Lula is 77 years old, “and he wants to crown his political biography with a term to reduce poverty and take Brazil back to the good years ”.
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