After Lula's statements that disturbed the markets, the head of the Central Bank of Brazil called for “fiscal balance”

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Roberto Campos Neto said that “otherwise, we will return to a world of uncertainty”. President-elect Lula had pushed for more space and increased social spending

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Following Lula's statements that worried the markets, the head of the Central Bank of Brazil called for “fiscal balance”

The president of the Central Bank of Brazil, Roberto Campos Neto (REUTERS/Adriano Machado)

The head of the Central Bank of Brazil, Roberto Campos Neto, emphatically defended the need for fiscal balance on Friday, after statements by President-elect Luiz Inácio Lula da Silva that made the markets nervous.

< p class="paragraph">In an event organized by the CFA Society Brazil group, Campos Neto said that the country must be attentive to social problems but also to fiscal balance, “otherwise, we will return to a world of uncertainty.”

Lula, who will take office on January 1, pushed on Thursday for more space and increased social spending without setting long-term fiscal rules or naming his top policymakers, sending Brazilian markets tumbling. .

Campos Neto, who will be in charge of the central bank until December 2024, highlighted that the positive dynamics observed in the margin for the inflation Brazil must be confirmed and will depend on the definition of the country's fiscal anchor in the future.

The negative reaction to Lula's comments is the latest example of investors giving an immediate and forceful to the economic proposals of new governments, in the midst of a challenging global context of high inflation, weak growth and little appetite for risk.

In Great Britain, for example, former Prime Minister Liz Truss he resigned after the markets rejected his plans for major tax cuts.

Following Lula's statements that worried the markets , the head of the Central Bank of Brazil called for “fiscal balance”

Luiz Inácio Lula da Silva (REUTERS/Ueslei Marcelino)

“I don't know if there was a Liz Truss moment for Brazil (yesterday), but it was a clear demonstration of the markets' sensitivity to the fiscal issue,” said Campos Neto.

He added that the autonomy of the central bank would pass “an important test”, but he believed in the continuation of that status under the future Lula administration. Campos Neto also emphasized that the authorities of the governing body are open to participating in the transition government.

Brazil's currency and the benchmark stock index, the Bovespa, rose last week after Lula's electoral victory, as fears of political volatility in Latin America's largest economy allayed.

But recent comments by the president-elect, in which he has said he intends to prioritize social spending over market concerns, coupled with a lack of clarity on his top ministerial appointments have led to a harsh reassessment of his future government.

Investors have said they want Lula to reinstate firm rules for public finances after the large outlays of the current President Jair Bolsonaro during the pandemic and election season.

The real and the Bovespa index fell more than 3% and 4%, respectively, on Thursday, after Lula's remarks .

(With information from Reuters)< /p>

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