February 2, 2023

Tricia Oak

Business & Finance Excellency

Brazil’s Lula seen favoring leftist Haddad for finance minister, sources say

BRASILIA, Nov 16 (Reuters) – Leftist former Sao Paulo Mayor Fernando Haddad is emerging as the front-runner to be Brazilian President-elect Luiz Inacio Lula da Silva’s finance minister, three sources told Reuters, although they said no final decision has yet been made.

Haddad, who was the Workers Party (PT) presidential candidate in 2018 while Lula was in jail, has become one of the president-elect’s closest aides, traveling with him this week to the COP27 climate summit in Egypt.

Investors, already jittery over Lula’s spending plans, are eager to learn who will be Brazil’s next finance minister.

A Haddad appointment, which the sources stressed was not a given as he is also in the running for foreign minister, would likely be seen by investors as the latest sign that Lula appears to be elevating leftist party members over centrist coalition allies in formulating his future economic policy.

Although coming from a relatively moderate wing of the PT, Haddad is still viewed as a less market-friendly choice, and would, if chosen, be likely to back Lula’s plan to find ways to replace a constitutional spending cap.

Lula is not expected to announce any of his ministers until early December after he returns from Egypt and Portugal trips.

“It was not by chance that Lula insisted on Haddad going with him to the COP27 climate summit in Egypt,” said one source close to both Lula and the former mayor.

Two other sources with knowledge of the matter confirmed Lula’s preference for Haddad, and one said that the two men would discuss the potential job on their trip to Egypt.

Lula’s press officer said they do not comment on speculation.

Lula was welcomed like a superstar at the climate talks in Sharm el-Sheikh on Wednesday on his first trip abroad as president-elect, in which he said Brazil was determined to save the Amazon rainforest and tackle climate change.

Haddad was the only member of Lula’s entourage who had no link to environmental issues, and none of the other names mentioned as potential finance ministers were invited on the trip, the sources said.

Markets tumbled in Brazil last week on concerns that Lula was delaying the naming of his finance minister and disregarding fiscal discipline as he studied ways to bypass the budget spending ceiling.

Haddad’s relationship with Lula strengthened during the 2018 presidential campaign, when he lost to outgoing far-right President Jair Bolsonaro. Lula’s graft convictions prevented him from running that year, but they were later overturned, allowing him to oust Bolsonaro in an Oct. 30 runoff vote.

Haddad failed in his bid to be Sao Paulo governor in last month’s election, losing out to Bolsonaro’s pick for the job.

A lawyer with a master’s degree in economics and a doctorate in philosophy, Haddad has become increasingly involved in economic issues and formulated one of the ideas that are being studied by the PT to replace the spending cap that limits increases in government expenditure to the rate of inflation.

His proposal involves readjusting that limit according to inflation and another economic indicator that has not been defined yet, but could be gross domestic product growth.

Lula has not yet given any indication of who will be his finance minister, but he has said he wants a politician who understands economics and management, and at the same time someone who is capable of negotiating with Congress.

Reporting by Lisandra Paraguassu; editing by Anthony Boadle, Gabriel Stargardter and Rosalba O’Brien

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