By PAULO NOGUEIRA BATISTA JR.*
Lula will be a strong candidate for re-election in 2026. And his nominees will have a large majority in the Central Bank from January 2025 onwards. Opponents are restless and manufacture crises
What caused the turbulence in the financial market and the media in recent weeks? A feeling of “crisis” was created. The unsuspecting must have thought that we were or are on the edge of an abyss. The speculative wave has already cooled down, but it is worth discussing what triggered it.
After all, were there reasons for such nervousness in the foreign exchange and financial markets, especially the rise of the dollar? I think so. They were not, however, primarily economic – but political. The economic and social results of the Lula government are between good and reasonable. Take, for example, GDP growth, inflation, the job market, poverty indicators, the balance of payments.
As for the so-called “fiscal risk”, the available information does not in any way suggest that Brazil is heading towards a collapse of government accounts. In fact, market expectations in relation to the public deficit (primary and total), as well as in relation to other macroeconomic indicators, have practically not changed in the recent past.
I mention two mainly political factors that help to understand the recent instability in the financial system. And that authorizes us to say, I believe, that the “crisis” was largely manufactured.
The 2026 elections
First factor: in recent months, it has become clear that Lula intends to run and will be a strong candidate for reelection in 2026. The traditional neoliberal right, which controls the financial system and the media, does not see this favorably, to say the least.
I'll be more clear. Let's not fool ourselves. A large part of this right wing – which has the nerve to present itself as a “center” – harbors hatred for Lula and the center-left. If not hatred, contempt. Otherwise contempt, deep distrust and rejection. It constitutes a pernicious grouping of reactionary, mentally narrow and deeply anti-national people. The danger for Brazil also lies in these people, and not just in the Bolsonarist ultra-right.
Unfortunately, by the way, the Lula government is infested with neoliberals, some very militant, which explains its difficulty in moving forward. “Noah’s Ark”, assembled by Lula in 2022, has its price – and it is not small. Despite this, he has achieved significant economic and social results, which leaves his opponents even more alarmed.
The President of the Republic has given many signs of peace and taken conciliatory decisions. Perfectly understandable. It's a game he plays well. But with what result in this political season? Sometimes you get the feeling that your efforts at conciliation may be seen as a sign of weakness. Despite pacification efforts, the execrable local plutocracy remains militantly against the government, seeking any and all opportunities to attack it.
As we know, the traditional right has a lot of power – political, financial and media. But he suffers from a small problem: he doesn't have the votes to win the presidential election. I would like to make a “third way” candidacy possible for 2026, but I probably realize that it will be very difficult. A more viable option for her would be to build a “Noah’s Ark” on the right with Tarcísio de Freitas as candidate.
The idea is to combine Jair Bolsonaro's votes with a broader candidate with a slightly more “civilized” appearance. The fifth-rate liberals of the traditional right would have no qualms about allying themselves with Bolsonarism again. Its most infamous spokespeople are already calling in public for a “moderate Bolsonaroism”.
Therefore, what we are looking for, from the outset, is to weaken and restrain Lula so that he arrives dehydrated at the next presidential election – preferably looking like a third way. A weak Lula, with a third-way attitude, could be defeated. Or, at the very least, forced to negotiate with the traditional right, or part of it, a new broad front that would maintain a possible Lula 4 in the same current condition of being partially blocked and restricted in his ability to promote changes.
Succession at the Central Bank
But there is a second factor behind the “crisis”. And more immediate than 2026. This is Lula's choice of who will hold the presidency of the Central Bank. By the end of the year, the President of the Republic will have to choose not only the president, but also two new directors for the Central Bank. Lula's nominees on the Monetary Policy Committee will have a large majority from January 2025.
Consequence? The bufunfa gang, or rather mob, remained on the lookout and, at the moment they deemed appropriate, tried to create economic turbulence, with the helpful help of Roberto Campos Neto. For what? To try to intimidate the President of the Republic and the Minister of Finance. The corporate media, for the most part a mere sidekick from Faria Lima, entered the field with dramatic warnings.
Arminio Fraga, an employee of the status quo, went public to threaten the President of the Republic with a “political fiasco” and a serious crisis if he makes a mistake in choosing the new president of the Central Bank. Edmar Bacha, another employee of the status quo, said verbatim: “Lula has to behave.” Just look, reader, at the immense arrogance of these people (I was about to write “crook”, but I stopped myself).
They really want Lula to nominate one of them for the position. Someone like Henrique Meirelles, or Armínio Fraga himself, or like Ilan Goldfajn, to mention just a few names from the long list of faithful servants of financial capital. If this is not possible, they accept that someone who can be co-opted is nominated.
At this moment, there are already four appointed by Lula on the board of directors of the Central Bank. They are quite tame, in general. They say nothing, do nothing – as far as anyone can tell. I believe they are involved in a cautious tactical movement, waiting for the not-so-distant January 2025.
I hope it's really just tactical. From January onwards, the game has to change. Evidently, no one is going to give up on an institution as complex as the Central Bank. But it can't be more of the same.
The Central Bank has functions of the utmost importance – it conducts monetary policy, issues currency, supervises and regulates the financial system, is part of and secretariat of the National Monetary Council, manages the country's international reserves, acts as a lender of last resort in periods of financial crisis. systemic, among others. It should not, therefore, be conducted independently of the rest of government and economic policy – and aligned only with the LOBBY private finance.
It is important to get the president and two new directors right. The future president of the Central Bank must be, in my humble opinion, someone not only with knowledge and experience, but also very close to the President of the Republic. This will make it more viable to establish the indispensable harmony between monetary policy and the rest of economic policy.
*Paulo Nogueira Batista Jr. is an economist. He was vice-president of the New Development Bank, established by the BRICS. Author, among other books, of Brazil doesn't fit in anyone's backyard (LeYa)[https://amzn.to/44KpUfp]
Extended version of article published in the journal Capital letteron July 12, 2024.
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