Lula has 124 loyal deputies and will need to negotiate each step of the fiscal adjustment

The Lula government will have to negotiate fiscal adjustment with the lowest faithful basis in the historical series. According to InfoMoney, a Diap survey identified 124 of the 513 federal deputies with constant support, the lowest number ever recorded since 1990, when the series began. To approve measures, Planalto will need to win over parliamentarians from the other group, the 246 classified as conditional support. Added to them, these deputies reach a potential of 370 parliamentarians.

The discussion gained momentum with the proposal from Samuel Pessôa, a researcher at FGV IBRE who is also part of the BTG Pactual partner structure. According to Estadão, he defends a package of nine items on the expenditure side, without depending on tax increases.

Among the suggestions, Pessôa proposes reducing the ceiling for real growth of expenses foreseen in the fiscal framework from 2.5% to 1.5%. He also suggests that the real appreciation of the national floor remains at a maximum of 0.5% annually. It also defends correcting the constitutional minimum for health according to the framework rule, and that for education according to inflation measured by the IPCA. According to the same newspaper, Pessôa argues that the drop in enrollment caused by demographics would open up space to increase real spending per student, keeping total real spending constant.

On the Executive side, InfoMoney reports that the Lula administration is studying changing the rules for expanding mandatory minimum spending on health and education, thinking about the fiscal adjustment of 2027. This plan has not yet received an official text and is just one of the options on the economic team's table. Today, these floors follow revenue indicators and can grow above the general limit of the framework.

The atmosphere is also one of distrust. According to O Antagonista, a debate on an article by André Lara Resende raised doubts about the fiscal adjustment of Lula's fourth term, and PT members treat the fear about the balance of public finances as a “market implication”.

Impacts for those who invest

Those who follow the stock market, interest rates and exchange rates need to observe above all whether the path of public accounts is credible. An adjustment that depends on changes in constitutional floors and readjustment rules, still without a formal text, leaves the market without a definition of the path for expenses. If negotiations on a conditional basis move forward with spending cuts, the scenario can be read as more favorable to controlling accounts; If it stops, uncertainty tends to continue weighing on assets linked to fiscal risk. None of this indicates price direction, and the final design of the measures will still determine the effect.

Automatically translated from Portuguese.