Brazil's President Vows to Combat Financial Speculation

SAO PAULO (Reuters) – Brazil's president vowed to combat the "speculative greed" of financial markets in an interview broadcast late on Sunday, urging Congress to set an example by cutting spending as the government prepares new fiscal measures.

Leftist leader Luiz Inacio Lula da Silva told broadcaster RedeTV!, "I beat them once and I will win again," referring to market jitters that have affected Brazil's public finances, causing the local currency to tumble and interest rate futures to soar.

Recently, Brazil's real has dropped to its weakest against the dollar since March 2021, increasing pressure on the government to swiftly implement spending cuts to demonstrate a commitment to fiscal discipline.

Lula stated, "I am in a very, very serious discussion process with the government… We can no longer play, every time we have to cut spending, on the shoulders of the people most in need." He emphasized that both the executive and judiciary must also sacrifice excesses and called on Congress to consider spending cuts.

Typically, Lula views spending on education and social security as investments rather than expenses. However, many economists warn that the fiscal framework could become unsustainable without necessary changes.

Even Brazil's central bank highlighted the need for fiscal discipline to combat inflation, which has led to accelerated monetary tightening at its last meeting.

The fiscal framework includes primary budget targets along with a cap on overall spending growth, but rising mandatory expenses, such as social benefits and pensions, pose a challenge by limiting room for investment and operational spending.