Lula's package of kindnesses in election year mobilizes more than R$180 billion

Lula, who is seeking re-election this year, has accelerated announcements and inaugurations in recent weeks. Starting this Saturday (4), the so-called "electoral defense" begins, a period of three months before the elections in which the government cannot hold events, inaugurations or publicity campaigns.

The announced measures are mainly aimed at Brazilians in intermediate income groups, social strata that represent around a third of the electorate and in which Lula faces resistance, according to data from Datafolha.

The president is ahead of senator Flávio Bolsonaro (PL-RJ) overall, but the congressman gains momentum among those with family incomes of 2 to 5 minimum wages (between R$3,200 and R$8,100 per month).

The survey carried out by the report brings together 16 measures announced by the government and was carried out based on the evaluation of economists and specialists in public accounts. At the beginning of May, they totaled R$144 billion in resources involved. The significant increase in June demonstrates the Lula government's rush to put the entire package of benefits in place before the start of the electoral calendar.

Of the 16 measures, six may have primary impacts, either due to loss of revenue or direct Union expenses - in this case, the government tried to seek sources of compensation, with increased taxes or budgetary changes. The other ten refer mainly to lines of credit with lower interest rates than the market, using state funds as a guarantee for the banking system.

One of the first measures of the year was the contribution of up to R$15 billion in the FGO (Operations Guarantee Fund), operated by Banco do Brasil, for the Desenrola 2.0 program. The FGO is administered by Banco do Brasil, which guarantees the payment of debts renegotiated by banks in the event of default.

Then, in April, the government announced a line of credit of R$21.2 billion to finance the purchase of trucks and buses, as well as a line of R$10 billion to purchase agricultural machinery from rural producers.

Furthermore, the report showed that the new line of credit for the purchase of motorcycles by app delivery people should provide around R$4 billion in new loans. Recently, the government also announced a R$30 billion line aimed at fleet renewal for taxi drivers and app drivers.

This week, when it announced a reduction in the diesel subsidy, the government reported that it disbursed up to R$16 billion at this stage to contain the impacts of the war in Iran on fuel prices.

The government also sent to the National Congress the bill that increases the revenue ceiling for those who are (MEI) Individual Microentrepreneurs to up to R$ 140 thousand in 2028, in a phased manner. If the proposal is approved in the form sent, the Executive estimates a revenue waiver of R$4 billion - R$2 billion annually between 2027 and 2028. Still regarding MEIs, the government also plans a debt renegotiation program for micro-entrepreneurs, with discounts reaching up to 70%.

Other measures were also taken by the government this year, but are not listed in the survey due to a lack of estimated fiscal impact. One example is the repeal of the tax on purchases up to US$50, the so-called "blouse tax", a measure taken at the beginning of May. For the entire year 2026, the economic team predicted a revenue of R$1.2 billion from taxation.

When contacted, the Ministry of Finance sent a note listing the number of projects with an economic profile approved since the beginning of Lula's mandate, stated that "the government has been working and producing consistently since day one" and said that the projects have "a direct impact on the daily lives of millions of Brazilians".

The magnitude of the package provokes critical comments from experts and the Central Bank itself about the possible inflationary impacts that they could generate. Among the challenges are the difficulty of reducing the basic interest rate, a target of President Lula's complaints.

In the most recent Monetary Policy Report, released last week, the BC assessed that the Lula government's package of measures represents a risk factor for the prospective scenario and reported that its effects will be monitored over the coming months. The institution also highlighted that the behavior of domestic demand will continue to be one of the elements considered in decisions on interest rates.

In the report, the executive secretary of the Ministry of Finance, Rogério Ceron, denied that the package of benefits has the potential to put pressure on inflation or make it difficult to conduct monetary policy. According to him, the economic team's assessment is that the initiatives will have a "neutral" or "slightly positive" effect on activity and do not represent a sufficient stimulus to generate pressure on prices.

For Jeferson Bittencourt, former secretary of the National Treasury and head of macroeconomics at ASA Investments, the set of credit stimulus measures announced by the government tends to have effects on both economic activity and the perception of fiscal risk.

Bittencourt also states that the BC has already recognized this risk, in the latest Copom decision. This scenario, he says, should lead the monetary authority to soon interrupt the cycle of easing monetary policy, reinforcing the dynamics of public debt expansion.

Alexandre Andrade, economist at the Independent Fiscal Institution (IFI), shares this view and assesses that the main macroeconomic effect of the package will be to require a higher Selic than would be necessary in the absence of these measures.

From his perspective, part of the measures also compromises the efficiency of monetary policy by increasing the weight of targeted credit, whose rates do not follow market conditions.

For Felipe Salto, former executive director of IFI (Independent Fiscal Institution) and partner at investment brokerage Warren Rena, there is exaggeration in the criticism of the government's package. According to him, although the set of measures has an electoral motivation and represents a boost to demand at a time of high interest rates, this does not make it comparable to initiatives adopted by previous governments.

The economist states that, in the case of measures related to fuels, "any government would have done something in response to a war" and assesses that the fact that the government presented fiscal compensations for this package is a merit of the economic team.

Salto considers, however, that the stimulus to demand occurs precisely when the BC maintains restrictive monetary policy, which contributes to putting pressure on future interest rates and increasing the cost of public debt. He also recalls that the government was unable to meet the objective set with the approval of the fiscal framework of ending the mandate with a primary surplus, but emphasizes that this does not constitute a crisis in public accounts. "I don't think there is a lack of control or a fiscal crisis," he said.

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