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Reports That Lula Still Unconvinced On Spending Cuts Weigh On Local Assets

BRAZIL
  • Brazilian assets look to have come under pressure this afternoon amidst reports that President Lula remains unconvinced about the need for spending cuts. According to reports, some government officials with knowledge of the spending review have said that the BRL 25.9bn in proposed spending cuts will all come from an audit of social programs where irregularities are suspected, with no additional savings planned for now.
  • Institutional Relations Minister Alexandre Padilha has also signalled the government only wants short-term cuts to comply with fiscal rules through 2026 and not ambitious reforms.
  • All eyes will be on a recorded interview with President Lula which Bloomberg says will be broadcast later, and which may provide more details on Lula’s thinking. After that, attention turns to the 2024 public spending and income report due on July 22, where the market looks for a freeze in some expenditure to meet the fiscal targets.

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