Lula's Government Coordinator Endorses Plan

José Sérgio Gabrielli, coordinator of Lula's re-election campaign government program, endorses André Lara Resende's proposal for a national fiscal-monetary council.

“Política fiscal para o fim de 2026 e para 2027”

Market Reaction to Proposal

The financial market reacted negatively to Lara Resende's proposal, and the Minister of Finance, Dario Durigan, publicly rejected it the day before.

Proposal Details

Lara Resende's plan includes creating a broader structure than the current CMN to set joint fiscal and monetary targets for 4 to 5 years.

Interest Rate Plan

The proposal calls for a gradual reduction of Selic to 7.5% over 12 months, followed by stabilization at 3% to 5.5% annually.

High Interest Rates Cause Debt Growth

Gabrielli states that high interest rates are the main driver behind the expansion of public debt, with the government debt reaching 82.9% of GDP in September.

Debt Levels Not Alarmist

The liquid debt is at 69.3% of GDP, 90% of the debt is in national currency, and the country has foreign exchange reserves.

Inflation Sources

Gabrielli attributes inflation pressures to external factors, not excessive domestic demand, citing the dollar's rise and B3's decline after the election.

No Impact on Social Programs

Gabrielli claims that potential spending cuts will not affect the real minimum wage, BPC benefits, Bolsa Família transfers, or constitutional health and education floors.

Tax Reform Focus

Gabrielli advocates for revising inefficient tax benefits and recovering credits from large taxpayers.

Gabrielli's Fiscal View

Gabrielli argues that there is no direct correlation between primary fiscal results and interest rates in Brazil over the past decades.

Interest Rate Reduction Strategy

Gabrielli supports a progressive adjustment of spending and revenue without imposing austerity on voters.

Market Financial Position

The financial market positions itself for Flávio Bolsonaro's victory, influencing the B3's decline after the election.

Government Debt Context

The government debt reached 82.9% of GDP in September, with the liquid debt at 69.3% of GDP.

Next Steps

The proposal aims to stabilize interest rates at 3% to 5.5% annually after a 12-month reduction to 7.5%.