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BRAZIL: Lula Fiscal Comments May Weigh on Local Assets Further

BRAZIL
  • Markets are currently receiving comments from President Lula, who appears steadfast that interest rates in Brazil cannot continue at these high levels, especially given the current level of inflation. Lula claims the country needs the central bank’s help and that Governor Campos Neto acts without autonomy.
  • Lula commented that he is willing to debate with financial markets and banks, detailing that the rich have seized part of the budget, and that the administration is unwilling to harm the poor. Regarding the budget, Lula explains that the administration needs serious debate going forward.
  • Ahead of tomorrow’s BCB meeting/decision, Lula says the central bank's behaviour is 'not adjusted' and that Brazil cannot continue with the current level of interest rates. The president highlights the country's economic situation is good and that inflation is totally under control. He notes that he will select a new BCB head who commits to CPI and growth.
  • Lula’s stance on the fiscal trajectory could hamper local assets at the open further, as he explains that his economic team has to show him the need for budget cuts. Lula highlights there are a lot of tax breaks in Brazil and tax breaks without counterpart are tantamount to giving money to the rich. He believes that under his government, Brazilian growth and salaries will grow.
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