Brazil’s President-elect Luiz Inácio Lula da Silva on Friday appointed Fernanda Haddad, a loyalist of his leftist Workers’ Party, as finance minister, stoking investor fears that the new administration will pursue a looser fiscal policy.
The appointment of political science professor Haddad, who previously served as education minister, dashed hopes among Brazil’s business community that Lula would adopt more pro-market policies to steer Latin America’s largest country through what are expected to be a bumpy few years. world economy.
“The choice of politician Haddad shows that Lula considers negotiations with Congress more important than the formulation of economic reforms,” said Adriano Laureno, a spokesman for the political consulting company Prospectiva.
Hadded is a longtime ally of the president-elect and is seen by some as his preferred successor. He is well known for his intelligence and political decency. But the financial elite, known colloquially as Faria Lima on São Paulo Avenue, are wary of him because they believe his focus on social justice will trump fiscal responsibility.
In an interview earlier this year, Haddad said the outgoing Jair Bolsonaro administration’s neoliberal, free-market focus was “unsustainable.”
“Thirty-eight percent of Brazilians earn only the minimum wage. If we don’t look at this side of society, if we only look at the stock market, at profits, we will applaud Bolsonaro,” Haddad said during the interview.
Haddad was born in São Paulo, has a master’s degree in economics and a doctorate in philosophy, and has been a member of the Workers’ Party (PT) for 20 years. Earlier in his professional career, he worked as an investment analyst in a bank.
Between 2005 and 2012, he served as Minister of Education, first under Lula and then under Dilma Rousseff. He was then elected mayor of São Paulo, but only served one term after voters rejected his bid for re-election amid a wave of anti-PT sentiment.
in 2018 he was called to run for president against Bolsonaro when Lula was jailed on corruption charges and banned from running. He lost by more than 10 million votes.
During the presidential campaign at the time, Haddad promised to raise the minimum wage, roll back labor reforms that benefited employers rather than workers, and halt privatization — all policies close to Lula’s heart.
In this year’s election, he lost the race for governor of São Paulo state, Brazil’s largest, to Tarcísio de Freitas, a Bolsonaro right-wing ally, by $2.5 million.
The first challenge facing the new administration is the ongoing battle in parliament over a constitutional amendment that would allow Lula to fund his campaign promises to increase social spending.
The amendment seeks to increase the country’s mandatory spending ceiling by $145 billion. R$ (US$28 billion) to maintain the country’s flagship Bolsa Família welfare distribution of R$600 per month. The increase would last for two years.
The move has spooked some investors and economists who fear the new government will abandon fiscal discipline.
Thierry Larose, a portfolio manager at Swiss bank Vontobel, said he expected other key posts in Lula’s economic team to be reserved for “market-friendly personalities”.
“Some technocrats should show that they still care about fiscal responsibility.” But priority will be given to social spending for the poorest and Keynesian-style policies will likely prevail,” he added.
André Perfeito, chief economist at brokerage Necton, said Haddad’s choice showed Lula would not pursue any major economic experiments. “Lula’s desire to make Haddad his direct successor in 2026 in the election is public,” said Perfeito. “Lula will not take more risks than necessary on the economic agenda.”
On Friday, Lula announced that Flávio Dino, a senator from the northeastern state of Maranhao, would be elected as justice minister; diplomat Mauro Vieira will become foreign minister; and José Múcio Monteiro, former president of the Federal Court of Accounts, would take over the defense portfolio.