Between angry and scared, Lula spends the week without accepting a major fiscal change

The ghost of Dilma 2 haunts Luiz Inácio Lula da Silva. This is a concern that the president expressed last week to people who discussed economic ideas, Congress, social programs or digital policy with him. He's somewhere between scared and angry.

In the case of the economy, the concern is a blatant reaction, as in the crash on Monday (26), when the president said unprintable things about "the market". He also says that he cannot stand these 20 years of talk of adjustment, as he is the president with the best fiscal results "ever", "since Fernando Henrique"; that Lula 3 fixed the "crap that [Jair] Bolsonaro did". He says that "the market" wants to take him "hostage", but will not "repeat 2015" (Dilma 2), the electoral fraud.

According to Datafolha, 42% of the electorate gave the president a "great or good" rating before the 2014 second round, and 20% "bad or terrible". In March, 13% "excellent or good" and 62% "bad or terrible".

The economic crisis began in the second quarter of 2014. In the first quarter of 2015, it was already a collapse. The number of people employed would begin to fall in the second quarter.

Lula is unhappy or irritated with suggestions considered basic by defenders of the "adjustment", such as containing the growth (not "cutting") minimum wage adjustments, social benefits, etc. It will not "betray" voters and the "poor people".

He wants new, “transformative” social measures, so that Lula 4 is different from Lula 3. Broader meetings between advisors began this week.

Lula doesn't say "no". He says he will listen to more people, such as former Finance Minister Guido Mantega and left-wing and PT economists, for whom the essential task is direct action to lower interest rates (indirect: via the effects of fiscal adjustment). Major "liberal" economists and bankers call Lula 3's ministers to campaign for the "adjustment".

In government, Lula has listened more to Bruno Moretti, Minister of Planning since April 2026, previously secretary at the Civil House (2023 to 2026, under Rui Costa). It is "developmentalist", to use a precarious synthetic term; He has had a career in PT governments since 2009.

For now, there should be nothing more than an attempt to strictly comply with the true target of surplus in the fiscal framework, with more freedom to block spending on certain items that are currently protected even by law.

An attempt will be made to increase revenue by reducing tax exemptions. That's the bulk of it. Lula is politically concerned even with suggestions of changing military pensions or aggressive action against "hangers-on".

As for the Farm, the names are these test balloons, Rafael Fonteles and Geraldo Alckmin. But: 1) Lula gives no indication of what he will do; 2) the name will matter less the less the minister has the mandate to change it; 3) the dispute over Finance, Civil House and Security is already the succession of Lula 4, via occupation of positions or vetoes of names.

Inflation expectations for 2027 rise, not least because of the more expensive dollar. For GDP growth, they fall to the range of 0.5% to 1.3% (it averaged 3% from 2023 to 2025; it could be 1.8% in 2026).

It is uncertain whether the Central Bank will cut the Selic rate on Wednesday (4). Longer-term interest rates, defined in the market, went beyond the panic of January 2025. Who knows, perhaps the risk of a dollar at R$6 or an IPCA of 6% will affect Lull's spirits.

This is a brief overview of the economy. The case of Lula 4 in Congress is even more complex than that of Lula 3.