Analysts and a leading newspaper have blasted ministers after local markets tanked in Lula’s first two days in office.

Criticism of Brazilian President Luiz Inacio Lula da Silva’s economic policies grew on Wednesday, with analysts and a leading newspaper criticizing ministers after local markets swung into the left. first two days in office.

Treasury Secretary Fernando Haddad, a Lula loyalist who ran for president in 2018 as a left-wing candidate for the Workers’ Party, was one of the main targets. His hometown newspaper O Estado de S Paulo called him a “decorative minister” on Wednesday.

Haddad, a former mayor of Sao Paulo, took office on a vow to restore public accounts and with the challenge of presenting a credible fiscal framework after Congress passed a massive Lula package for social spending.

Lula has said eradicating poverty and hunger will be the “hallmarks” of his government, leading to fears of unbridled spending and little fiscal discipline.

Markets reacted badly to Haddad’s first days in office, especially after Lula ordered a budget extension of a fuel tax exemption that Haddad had publicly opposed.

“Haddad learned on his first day in office that he will be a decorative figure, a kind of task worker for President Lula,” the conservative newspaper said in an editorial.

The newspaper, which did not shy away from criticizing former far-right president Jair Bolsonaro, added that Haddad had been “discredited from day one” and would have to learn to say “no” to Lula.

Analysts at Citi said on Tuesday that while Lula’s and Haddad’s initial speeches were in line with their base case scenario, both sounded less pragmatic and fiscally sound than initially thought.

“Overall, they have created the impression of a government that is tone-deaf — at least with respect to the kinds of tones financial markets want to hear,” BMO Capital Markets’ currency strategists told clients, adding that their comments may lead to a situation in which “inflation will reassert itself and interest rate cuts will be wiped out”.

The Brazilian real BRBY is down 3.8 percent against the US dollar in the past three sessions, reaching its lowest level since July 2021, while the reference stock index Bovespa is down about 5 percent so far this year.

In Wednesday morning trading, little had changed for either.

‘Reverse reforms’

Much of the recent stock market decline came on the back of state-run oil giant Petrobras, whose shares are down about 9 percent so far this year on fears of a more interventionist stance in the company.

Senator Jean Paul Prates, who has been named head of the company by Lula, has called for Petrobras to increase investment in renewables and refining and said he plans to adjust the company’s investment-friendly fuel pricing policy, linking local fuel at international prices and foreign prices. exchange rates.

In addition, markets were also rocked on Tuesday by comments from Lula’s social security and labor ministers.

Social Security Minister Carlos Lupi stunned the market with his remarks that the country’s social security system was not in deficit, despite Treasury figures showing a cumulative January-November deficit of 267.9 billion reais ($49 billion).

That was compounded when he said Lula’s government should review the investor-friendly pension reform approved by Bolsonaro’s government.

Labor Minister Luiz Marinho, a critic of a 2017 labor reform passed under former President Michel Temer, said the new government would prioritize regulating working relationships established through mobile phone apps and digital platforms.

Their comments showed that “the administration remains on the path of reversing the liberal reforms passed by the last two presidents,” according to analysts from Guide Investimentos.

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