Business resistance to Lula worries campaign’s team - Valor International

The political team behind President Luiz Inácio Lula da Silva’s (Workers’ Party, PT) reelection campaign is worried about strong resistance from the business community toward the president, and believes he made a mistake by failing to break through that barrier over the past few years.

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According to PT insiders, although part of the financial market has reservations about Flávio Bolsonaro (Liberal Party, PL, Rio de Janeiro) in the presidential race, opposition to Lula remains high, making it harder to secure support ahead of the October election. To avoid unsettling financial markets, the president’s campaign has designated Finance Minister Dario Durigan as its principal spokesperson with the business community.

According to allies, since the start of Lula’s third term in 2023, the president had been advised to build closer ties with business leaders, both to facilitate governance and to reduce resistance within the sector. Lula, however, didn’t follow that strategy and, according to people familiar with the matter, ended up growing even more distant from the business community. They say business leaders were interested in expanding direct dialogue with the president, but opportunities to strengthen those ties went unseized.

According to these sources, the growing distance has fueled the sector’s opposition to Lula and now complicates efforts to win over voters just months before the election. In recent weeks, senior members of the campaign’s political leadership have stepped up efforts to rebuild those relationships, but so far without significant results. Against that backdrop, the campaign’s strategy has been to avoid announcements or promises that could trigger market volatility during the race.

Relations deteriorated further after José Sergio Gabrielli, coordinator of the PT’s government platform, gave an interview to O Globo in which he said the policy document under discussion for a potential fourth Lula administration includes proposals to increase public spending, expand the role of state-owned banks, introduce capital flow controls, and advance the taxation of financial income. His remarks drew a negative reaction from financial markets.

In an effort to contain the fallout, PT chairman Edinho Silva downplayed the former Petrobras CEO’s comments in an interview with Valor. At the time, Edinho said “there’s only one person in charge of economic policy, and that’s President Lula,” adding that “the spokesperson on economic matters is Finance Minister Dario Durigan.”

At the same time, the campaign instructed its members to limit public disclosures on the economic portion of the government platform to avoid further controversy. As a result, communication on economic issues has been concentrated in the hands of the finance minister.

Even so, as previously reported by Valor, Gabrielli met with representatives of the financial market in mid-July to present economic proposals that drew criticism from market participants. Although some of the ideas he presented are part of internal discussions within certain PT factions, they haven’t been endorsed by the Finance Ministry, the party’s national leadership, or Lula for inclusion in the government platform.

Campaign officials say part of the business community remains reluctant to support Flávio Bolsonaro for president. Even so, that resistance toward Lula’s opponent hasn’t been enough to translate into support for the incumbent.

The reason, according to some economists, is that measures introduced by the federal government could increase Brazil’s public debt and make it harder for the Central Bank to control inflation. Since the start of Lula’s current term, gross public debt has risen by more than 8 percentage points relative to GDP, surpassing 80% of GDP. Both the federal government and independent experts, moreover, project that the ratio will keep rising in the coming years.

Against this backdrop, one faction within the campaign argues that Lula should avoid making commitments with a significant fiscal impact during the campaign. Their assessment is that a campaign free of proposals that could unsettle financial markets would give a potential new administration more room to maneuver in negotiating its agenda and implementing the measures it considers necessary.

In that context, the possible adoption of fare-free mass transit in cities—including buses, subways, and commuter rail—is under discussion. Government and PT officials view the proposal as a policy with substantial social impact that could send a positive signal to both social movements and the public transportation sector. Another faction within the party, however, argues that an initiative of this scale requires more in-depth study before being incorporated into the government platform.

This article was translated from Valor Econômico using an artificial intelligence tool under the supervision of the Valor International editorial team to ensure accuracy, clarity, and adherence to our editorial standards. Read our Editorial Principles.