巴西规划部长Moretti称卢拉若连任可在四年内把初级财政收支改善2个百分点GDP并转为盈余，但未给出任何具体措施

Just months ago, Brazil President Luiz Inácio Lula da Silva described Planning Minister Bruno Moretti as a budget “magician” who finds money when the government needs it. Now, Moretti says the leftist leader can shore up public finances without deep spending cuts if he wins reelection.

Brazil’s primary budget balance — which excludes interest payments — would improve by two percentage points of gross domestic product over the eventual four-year term, swinging to a surplus from a deficit, Moretti said in an interview. The strategy would rely on slowing mandatory spending growth, extending an effort that is already underway, he said.

And when it comes to investor skepticism over Lula’s commitment to public spending prudence, Moretti minces no words. “I don’t think that’s a soft fiscal adjustment,” he said from his office in the capital city of Brasilia.

Moretti, a government official with deep expertise in Brazil’s budget, took the helm of the Planning Ministry in March after serving in the office of Lula’s chief of staff. He has been closely involved in the administration’s spending decisions, giving him a front-row seat to Brazil’s growing liabilities. With just a month left to go before the vote, investors are still searching for details on how the leftist president would tame gross debt, which has risen about 10 percentage points to 82.5% GDP since he returned to office in 2023.

Improving Brazil’s primary balance is only part of the job. That gauge excludes the cost of servicing government debt, which is a top concern as high interest rates make financing ever more expensive. Brazil was stripped of its investment-grade status in 2015 largely over looser fiscal policy and, since then, successive presidents have struggled to replenish public accounts.

Even as financial markets remain on edge, Lula’s government is taking an initial step forward, Moretti said: its 2027 budget proposal envisions a primary surplus of 18.6 billion reais ($3.7 billion), or 0.13% of GDP.

That result compares with a projected primary deficit of 0.4% of GDP in 2026, meaning next year’s budget alone signals an improvement of more than half a percentage point of GDP. By the end of a potential new Lula term, the administration is targeting a primary surplus of 1.5% of GDP.

To boost the budget, the government will require new measures to rein in mandatory expenditures, Moretti said, highlighting the need for more efficient public policies and for keeping spending growth in line with the fiscal framework. Still, the details of such plans have to be reviewed by Lula, he said.

Lula has yet to give concrete signals about what measures he would adopt in a fourth term. He is following a strategy he has used before: listening to different economic views among his allies before jumping in to make a final decision.

One fiscal policy option, however, is definitely off the table: having pension payments rise more slowly than the minimum wage. “Social security is an instrument of social protection and poverty reduction,” Moretti said.

More broadly, the government would have to not lose sight of the need to show how its policies are improving Brazilians’ living standards, Moretti said.

“The era of gratitude is over,” he said. “People understand these things as their rights, and our agenda needs to deliver improvements in people’s quality of life.”

‘Moderate’ Subsidies

Brazil’s presidential race is neck-and-neck, with polls showing Lula’s lead over right-wing rival Flávio Bolsonaro fading thanks to factors including a slowing economy and fallout from corruption allegations against his son. Local stocks have jumped while the real has outperformed peer currencies as investors react to the incumbent’s waning advantage.

The first round vote will be on Oct. 4, followed by a runoff three weeks later.

With the election nearing, Moretti also pushed back against another source of investor concern: Lula’s growing use of government-backed credit and other stimulus. The 2027 budget sets aside 97.9 billion reais for subsidized lending through public funds.

Critics say those programs can increase government debt even though the transactions don’t count toward the primary balance or spending limits under the fiscal framework. Furthermore, they add to budget risks and propel demand at a time when the central bank is trying to slow inflation to its 3% target.

Moretti disputes the idea that the subsidized lending expenditures accurately capture the impact on Brazil’s finances. The funds are disbursed gradually, he said, meaning they don’t hit public debt all at once.

“They are moderate subsidies for high returns,” Moretti said.

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He rejected views that the programs generate a consumption shock large enough to significantly complicate the central bank’s inflation fight.

Consumer price expectations can also be driven by supply shocks unrelated to domestic fiscal policy, Moretti said, citing the El Niño weather pattern and swings in oil prices.

“There is an ideological prejudice against public spending of a social nature,” he said.