Spotlight: Lula's plans to jump-start the economy

Brazil’s President Luiz Inácio Lula da Silva signed a decree recreating the low-income housing program Minha Casa, Minha Vida, which might boost the construction sector, as other plans with expected macroeconomic benefits are on the table.

Under the program, some 2mn subsidized houses will be built through 2026, generating 1mn jobs.

Originally created in 2009 during Lula’s second term, the program was renamed and trimmed down in 2021 by the Jair Bolsonaro administration, after which housing construction faltered.

"This housing program has an important economic effect because it impacts a large chain, from workers hired to industries providing construction inputs," André Perfeito, chief economist at the Newton brokerage, told BNamericas.

The government is also planning to raise the minimum wage by May to 1,320 reais (US$253) from 1,302 reais and increase the taxation threshold, exempting monthly incomes of up to 2,640 reais, compared to 1,903 reais currently.

Development bank BNDES will become key in jumpstarting the economy. BNDES head Aloizio Mercadante is in talks with the finance ministry to change the interest rate model the bank applies to companies.

Currently, the bank uses the long-term interest rate (TLP) model, based on monthly inflation, to calculate instalments. Mercadante plans to change TLP calculation to a model involving average inflation over a longer term to reduce fee volatility.

The government’s moves are aimed at boosting the economy, which is expected to slow this year, one reason being the high Selic rate to combat inflation.

The 100 economists the central bank surveys weekly expect GDP of 0.76%, compared with 3% last year.

"With these economic measures taken by the government, the trend is that in the coming months market agents will begin to revise upwards their GDP projections. I have an expectation of 2.1% for GDP growth this year, but I likely revise it upwards in view of these recent measures," said Perfeito, highlighting that the economy could still be hit by poor global economic performance.