The main economists of the Brazilian Workers’ Party and their entourage are almost united in rejecting a new law that protects the central bank from presidential influence, but there is an important dissenting voice in the party: former president Luiz Inácio Lula da Silva. .
As Lula prepares for his presidential campaign this year, he has deliberately avoided naming a spokesperson for his economic proposals. This has made it clear that only Lula is the decisive voice on his economic agenda, and he has shown no qualms about seeking common ground with centrist figures, even as he breaks with the consensus of his left-wing party.
Early signs of moderation from the front-runner in this year’s election have made some investors bullish on Brazil, helping to attract nearly $10 billion in foreign flows to local markets and boost the currency and the actions of the country.
In interviews with half a dozen economists and former ministers who advise Lula or his party’s political think tank, they all made it clear that they were not speaking on behalf of the former president.
That was made abundantly clear in criticism of a law passed last year that formalizes the central bank’s autonomy, giving its governor a term to coincide with presidential elections and removing the cabinet’s role from the government.
Five of the six economists interviewed by Reuters rejected the law, warning that it tied the president’s hands on macroeconomic policy. Lula himself criticized the idea a year ago, but has since downplayed concerns.
“People have problems with the so-called independent central bank. Look, this central bank has to be committed to Brazil, not to me,” Lula said last month, adding that he was open to a constructive dialogue with the current central bank president. “I see differences of opinion, but no obstacles.”
Two other political advisers to Lula, who spoke on condition of anonymity, ruled out any effort to change the central bank’s law if he wins the October election, for which he has a wide lead according to polls.
On the other hand, the consensus between Lula’s advisers and the Workers’ Party has aligned more clearly with the economic agenda that he has publicly anticipated.
All agree to relax fiscal rules to allow an expansion of public investments, social programs and “green” growth initiatives, while scrapping the large privatizations proposed by current President Jair Bolsonaro.
Skeptical “developmentalists”
Yet Brazil’s leftist economists seem wary of relinquishing government control of monetary policy.
Pedro Rossi, member of the Perseu Abramo Foundation (FPA) think tank, created by the Workers’ Party, and professor at the State University of Campinas (Unicamp), a hotbed of the PT’s “developmentalist” school of economic policy State-led, said the central bank should follow the president’s lead.
“Monetary and fiscal policy cannot go against each other,” argued Esther Dweck, an economics professor at the Federal University of Rio de Janeiro and former budget secretary in the last PT government.
Luiz Gonzago Belluzzo, a Unicamp economics professor who has advised Lula for decades, argued that government policy should be able to use some $360 billion of foreign reserves held by the central bank to further stabilize the exchange rate. from the country.
His criticism echoed that of former finance minister Guido Mantega, who waged what he called a “currency war” while serving under Lula and his PT successor Dilma Rousseff, fighting what he saw as an overvalued exchange rate.
Mantega told Reuters the central bank’s current hands-off approach to Brazil’s foreign exchange market had led to excessive depreciation, contributing to Brazil’s double-digit inflation.
The law that established central bank autonomy last year included a mandate to stabilize economic growth and encourage full employment.
Eduardo Moreira, founder of asset manager Brasil Plural and who has advised Lula on economics, argued in an interview that the newly independent central bank had not changed its policy or communication to reflect that new mandate.
Nelson Barbosa, a professor at the Getulio Vargas Foundation who was finance minister under Rousseff, was the only economist surveyed who saw no problem with the central bank’s new formal independence, arguing that it had little effect on economic policy.
“I don’t think it will be a big problem with Lula’s eventual return,” he said.
Source: Gestion
Ricardo is a renowned author and journalist, known for his exceptional writing on top-news stories. He currently works as a writer at the 247 News Agency, where he is known for his ability to deliver breaking news and insightful analysis on the most pressing issues of the day.
