Spotlight: Lula's government program

The campaign of Luiz Inácio Lula da Silva, the leftist ex-president who leads the polls ahead of Brazil's October presidential election, released its government program, which calls for a greater role by the State in Latin America's largest economy.

Lula’s Workers Party (PT) program outlines opposition to the current government’s privatization plans for firms such as power holding Eletrobras, postal service Correios, oil company Petrobras and Pré-Sal Petróleo (PPSA), a state company created in 2013 to represent the government’s interests in oil and gas production-sharing contracts.

"[Petrobras] will once again be an integrated energy company, investing in exploration, production, refining and distribution, but also acting in the segments that connect to the ecological and energy transition, such as gas, fertilizers, biofuels and renewable energies," the PT program states.

"Lula and his Workers Party are reinforcing their old view of the role of state-owned companies as a kind of government arm in the economic sectors in which they operate," Mario Sergio Lima, a senior political analyst at Medley Global Advisors, told BNamericas.

For his part, rightwing President Jair Bolsonaro, who will seek a second term in the October 2 election, has moved to speed up Petrobras’ sale of non-core assets in recent years.

Called Juntos pelo Brasil (Together for Brazil), the program has 121 paragraphs of proposals and can be seen at this link.

“This document is not the final [version], it is a starting point," said Aloizio Mercadante, a member of various cabinets during the past PT administration and currently the head of think tank Perseu Abramo Foundation, which drew up the document.

THE ROLE OF STATE-RUN BANKS

Also in contrast with the current administration, Lula's program calls for greater participation by state-run banks, including the development bank BNDES.

"We will also strengthen public banks – such as Banco do Brasil, Caixa Econômica Federal, BNDES, BNB, BASA and FINEP – in their mission to foster economic development, as well as social and environmental aspects and in the provision of long-term credit and guarantees in structuring projects, committed to the financial sustainability of these operations," the program states.

The PT was in power from January 2003 to mid-2016. Lula was president for the first eight years, while Dilma Rousseff was president between January 2011 and August 2016, when she was impeached on allegations of mishandling fiscal accounts.

During the PT’s time in office, state-run banks, mainly BNDES, were used to fuel the economy. In the case of BNDES, the bank injected cash into major projects and heavyweight companies, using subsidized loans, a strategy criticized by analysts as it created distortions in the economy.

The current strategy of BNDES leaves more room for private sector banks to provide loans for companies and projects and could be difficult to reverse.

"The fact that BNDES funding is no longer based on the old TJLP [a subsidized interest rate, which was lower than the Selic base rate] reduced BNDES's share in the financing of projects. Before, the infrastructure financing market was very dependent on BNDES – currently it’s much less so," Fernando Guimarães, head of project finance at Bradesco BBI, the investment banking arm of Banco Bradesco, told BNamericas.

INFRASTRUCTURE

The PT also calls for the end of spending cap rules, which limit increases in government spending to inflation, pointing to more public investment in infrastructure projects.

"It is necessary to guarantee the modernization and expansion of transport infrastructure, of social and urban logistics, with a vigorous public investment program. We will ensure the immediate resumption of investment in infrastructure, essential for the return of growth and decisive to reduce production costs," it says.

The program underlined the party will also incentivize the participation of private sector investment in infrastructure.

"Private investment will also be an important part of the reconstruction of Brazil and will be stimulated through credits, concessions, partnerships and guarantees," it adds.

Indeed, analysts expect infrastructure concession plans to remain on track after the October election. 

"The infrastructure concessions agenda began to take its first steps in the 1990s and, during previous PT governments, this agenda continued, with several auctions of highways and airports. I see no change in these concession models ahead," says Bernardo Figueiredo, an infrastructure consultant and former head of land transport regulator ANTT. 

"If we look at some sectors of the economy, as is the case of infrastructure, we need to find a balance to have both public and private sector investments. No major country in the world grows only with public investment or only with private sector investment," adds Figueiredo, who was also president of state planning and logistics firm EPL during Lula’s government.

MINING

The leftist party program advocates a more integrated value chain in the mining industry and opposes any attempt to allow mining on indigenous lands in the Amazon, something Bolsonaro’s government has defended.

"Brazil is a large mineral producer; mining activity must be stimulated through greater internal industrial linkages and commitment to the protection of the environment, workers' rights and respect for local communities. The standard of mining regulation must be improved and illegal mining, particularly in the Amazon, will be tackled," the party says in its program.

WORKERS’ RIGHTS

The party's program also defends a review of labor laws that were approved during the Michel Temer administration following Rousseff’s ousting, which involved cutting certain labor rights.

"The new government will propose, based on a broad debate and negotiations, new labor legislation providing extensive social protection for all forms of employment and employment relationships, with special attention to the self-employed," it says.

Pictured: Lula (right) with running mate Geraldo Alckmin