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BRAZIL: President Lula Attempts to Bolster Waning Approval Ratings

BRAZIL
BulletEM BulletEmerging Market News
  • Amid declining popularity, President Lula called for a radio and television address on Monday night to praise government programs in the areas of health and education. Lula officially announced the expansion of two key initiatives relating to the Pé-de-Meia (Piggy Bank) program and payroll-deductible loans, both considered significant for building a showcase and increasing the chances of re-election in 2026.
  • There is a discussion within the government to make more statements on national television, in order to reach a portion of society that is currently disconnected from the Executive's actions. Monday's video was the first after marketing expert Sidônio Palmeira took over as head of the Social Communications Secretariat and had a light tone and more popular language.
  • The Brazilian real fell 0.75% on Monday in anticipation of the address, while also being affected by the softer tone for risk sentiment. It highlights how the Lula administration will need to tread a fine line between boosting approval and renewing investor concerns over the fiscal trajectory.
  • BBVA believe the benefits expansion suggests limits to the government’s push for additional fiscal stringency and rather, a setup that is likely to become looser as the 2026 elections approach.
  • Itaú are leaving their USDBRL forecasts unchanged at 5.90 in both 2025 and 2026. Despite some short-term relief, the fundamentals – particularly the combination of persistently high fiscal risk with a stronger dollar globally – still point to a lower BRL.
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  • Amid declining popularity, President Lula called for a radio and television address on Monday night to praise government programs in the areas of health and education. Lula officially announced the expansion of two key initiatives relating to the Pé-de-Meia (Piggy Bank) program and payroll-deductible loans, both considered significant for building a showcase and increasing the chances of re-election in 2026.
  • There is a discussion within the government to make more statements on national television, in order to reach a portion of society that is currently disconnected from the Executive's actions. Monday's video was the first after marketing expert Sidônio Palmeira took over as head of the Social Communications Secretariat and had a light tone and more popular language.
  • The Brazilian real fell 0.75% on Monday in anticipation of the address, while also being affected by the softer tone for risk sentiment. It highlights how the Lula administration will need to tread a fine line between boosting approval and renewing investor concerns over the fiscal trajectory.
  • BBVA believe the benefits expansion suggests limits to the government’s push for additional fiscal stringency and rather, a setup that is likely to become looser as the 2026 elections approach.
  • Itaú are leaving their USDBRL forecasts unchanged at 5.90 in both 2025 and 2026. Despite some short-term relief, the fundamentals – particularly the combination of persistently high fiscal risk with a stronger dollar globally – still point to a lower BRL.