market puts pressure on the plateau, but Lula postpones spending cuts and focuses on travel

The government's economic team met this Thursday (5) at Palácio do Alvorada, in Brasília, after strong pressure from the financial market. According to Gazeta do Povo, the meeting called by President Luiz Inácio Lula da Silva was attended by Dario Durigan, Geraldo Alckmin, Fernando Haddad, Guido Mantega, as well as other ministers and economists.

Despite demands for austerity, the government frustrated expectations of adjustment. According to Gazeta do Povo, Dario Durigan declared after the meeting that "we did not discuss specific measures". The evaluation of new actions in the fiscal area was postponed until after Lula's return from COP31 in Türkiye.

The fiscal scenario worries analysts given the potential cost of Lula's campaign package, estimated at R$300 billion according to IFI, and the general government's gross debt, which reached 82.9% of GDP according to data from Estadão. The lack of momentum in spending occurs at a time of uncontrolled inflation, with the Focus Bulletin last Tuesday (3) pointing to the 2026 IPCA estimated at 5.22%, above the ceiling of 4.5%.

Real economy indicators also put pressure on the business environment. Industrial production in September recorded a decline of 0.8%, accumulating a loss of 4.1% since May according to Gazeta do Povo. In the monetary scenario, the Copom maintained the Selic at 13.75% on Wednesday (4), while the Stock Exchange has accumulated foreign capital outflows of R$8.4 billion since the re-election.

What changes for the investor

The government's hesitation in presenting a concrete plan to contain expenses keeps the risk premium high on the interest curve and puts pressure on the exchange rate. For those who operate on the stock exchange and futures markets, fiscal uncertainty combined with projected inflation above the target requires extra caution with the volatility of Brazilian assets and long-term pricing.

Automatically translated from Portuguese.