Brazil's Lula sets taming inflation as priority if elected

Former Brazilian President Luiz Inacio Lula da Silva, the frontrunner in the upcoming presidential election, on Tuesday proposed ending a cap on government spending and taming inflation as key priorities if elected. A leftist who leads incumbent far-right President Jair Bolsonaro in opinion polls, Lula presented a government programme if elected in October that was largely in line with recent remarks he has made.

The programme calls for tax reform with "the poor paying less and the rich paying more." A potential Lula administration would also look to scrap Brazil's spending ceiling while revising the current fiscal framework to put in place a new one based on "credibility and predictability." The plan also envisages Brazil transitioning to a new fuel pricing policy that takes into account "national costs", as the country grapples with high inflation and rising energy prices.

State-run oil company Petrobras currently pegs fuel prices to international energy markets and foreign exchange rates rather than offering subsidies. The plan by Lula, who led Brazil from 2003 to 2010, added that policies aimed at reducing volatility in forex rates could also be targeted to lower inflation.

"The passive guidance towards exchange rate policy in recent years has increased the volatility of Brazil's currency against the U.S. dollar, with perverse consequences for the consumer price index," Lula's plan said. Brazil's central bank has been hiking interest rates in a bid to tame high consumer prices.

The leftist leader reiterated that he is "strongly" against the privatisation of power firm Eletrobras as well as any plans to privatize Petrobras, PPSA and postal service Correios. Bolsonaro, a self-proclaimed free-market advocate, privatized Eletrobras through a 33.68 billion-real ($6.57 billion) share offering earlier this month and has also indicated he is in favor of privatizing the other three companies. ($1 = 5.1272 reais)