Luiz Inácio Lula da Silva, 78, has turned his left little finger, which he lost in an industrial accident as a metalworker, into a trademark. For many Brazilians, it is a daily reminder that their president, before ruling from a palace, was a worker and union leader. Lula believes the industry should be as important to the Brazilian economy as it has been in his life and professional career. The government he leads presented this Monday a plan to stimulate the industry for the next decade, which includes 60,000 million in low-interest loans, subsidies and grants to reactivate the economy. “Now we are the ninth economy in the world, not because it has grown strongly, but because others have fallen. This is not something to be proud of,” he warned during the presentation at the Planalto Palace in Brasilia.
Lula has suggested that the state should once again be a central actor in economic policy after six years in which a center-right government (with Michel Temer 2016-2018) and another far-right government (2019-2022) opted for liberal policies should be a thinning out of public power. In addition to facilitating low-interest loans through the BNDS (the National Development Bank), the reindustrialization project is also considering subsidies, subsidies or the prioritization of nationally produced goods in government purchases, in addition to promoting sustainable financial instruments and innovation loans. “It is very important to have an innovative and digitalized industrial policy again,” announced the president, who insisted on cooperation between public power and private initiative.
The president trusts in this plan to boost industry and invest in public works, which he presented in July, so that “Brazil makes a qualitative leap” and “moves once and for all to the category of developed countries”. “Because we always stay there, at the doors,” complained the president. He also recalled that in recent years his country was once considered the sixth largest economy in the world, but then fell to twelfth place.
Finance Minister Fernando Haddad, the strongman of the economic wing, was not at the presentation; he had an event in São Paulo. Haddad is the main architect of the tax reform, which includes the introduction of VAT, among other measures to simplify the complicated tax system. And he is the main defender of the zero deficit policy adopted by the government this year, although it does not arouse the enthusiasm of President Lula.
The reindustrialization plan is the grand project of government Vice President Geraldo Alckmin, a former center-right rival who has accepted Lula's invitation to join forces to topple Jair Bolsonaro from power and restore damaged democracy.
The industrialization plan is viewed with considerable suspicion, as shown by the fact that the real fell by 1.2% after the presentation. And the stock market closed down 0.8%. The editors of the most important newspapers and some of their columnists fear these days that Lula and the Workers' Party will engage in excessive government spending. The memory of the recession into which Brazil plunged with Dilma Rousseff as president and which, together with the political unrest, led to her dismissal from parliament is still alive.
An official visit by the president on Friday brought old ghosts back to life. Lula went to the Petrobras Abreu e Lima refinery in Pernambuco, which was an emblem of Brazil's potential in the good times of the PT and which in a short time became the focus of the largest corruption scandal on the continent, investigated in Lava Jato. The fact that the president announced with style that work would be resumed with millions of investments, even though the original project was several times more expensive than expected and was only half completed, caused a stir among critics of the PT's worst economic policies. Lula has never left the orthodoxy .
Lula's recipe for putting Latin America's first economy on the path of sustainable growth is reindustrialization, similar to what he used in his first two terms in office (2003-2010). Then there was an unprecedented demand for raw materials from China, which provided an invaluable boost. But now the Brazilian economy has been sluggish for a decade, although it will end the 2023 financial year with a significantly better result than forecast at the beginning of the year.
Over the last decade, GDP has grown by an average of 0.5%. And the good news that it will end last year with a gain of around 3% (three times what was forecast a year ago) comes with the forecast that this year will not be so favorable. However, Portal expects it to remain at 1.2% until 2024.
The leader of the Brazilian left leads a coalition government that includes, among others, the Workers' Party, members of the classic right and a party to the left of the PT. For Lula, it is necessary to expand and strengthen industry so that Brazil is less dependent on agribusiness – which is now the most important sector of the economy and is overwhelmingly favored by Jair Bolsonaro – and on exports. The spectacular harvests in 2023 have pushed Brazilian exports to record levels, with sales of 300 billion dollars and a surplus of about 85 billion.
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