Brazil's Lula eyes new measures to tame inflation if elected

A leftist who leads incumbent far-right President Jair Bolsonaro in opinion polls, Lula presented an official government program that was largely in line with recent remarks he has made. Notably, the document said, his government would use central bank exchange rate policy to combat inflation.


Reuters | Brasilia | Updated: 22-06-2022 02:01 IST | Created: 22-06-2022 01:46 IST
Brazil's Lula eyes new measures to tame inflation if elected
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Former Brazilian President Luiz Inacio Lula da Silva, the frontrunner in the nation's October presidential election, on Tuesday proposed ending a cap on government spending, taming inflation and dramatically reining in deforestation as key priorities if elected. A leftist who leads incumbent far-right President Jair Bolsonaro in opinion polls, Lula presented an official government program that was largely in line with recent remarks he has made.

Notably, the document said, his government would use central bank exchange rate policy to combat inflation. "The passive orientation 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," the document said.

While Lula has previously committed to preserve the central bank's independence, his political plan criticized the economic effects of rising interest rates, saying they slow down activity and increase unemployment. The document also called for the removal of "regressive aspects" of a 2017 labor reform law - which included measures that diluted collective bargaining and reduced the scope for legal action in labor disputes - rather than the outright repeal of the law that Lula had previously advocated.

Lula's trademark tax reform would bring polices with "the poor paying less and the rich paying more," and he also called for the establishment of a "net zero deforestation" goal. 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 said.

Additionally, the plan 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. Lula reiterated that he is "strongly" against the full privatization of power firm Eletrobras, as well as any plans to privatize Petrobras, postal service Correios and the PPSA, a government agency that receives and markets the oil producers hand over to the state as a condition of their royalty agreements.

Bolsonaro's government privatized Eletrobras - which was previously partially state-owned - through a 33.68 billion-real ($6.57 billion) share offering earlier this month. The government has also indicated that Bolsonaro is in favor of privatizing the other three companies.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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