Brazil’s Lula to announce fiscal framework after China visit

The president also called the Brazilian Central Bank's current interest rate is "irresponsible"

Brazilian President Luiz Inacio Lula da Silva said on Tuesday a proposal for new fiscal rules would only be announced after he visits China next week, disappointing expectations for an earlier presentation and triggering an adverse reaction in the bond market.

The new framework is considered crucial to addressing fiscal concerns after Lula secured congressional approval for a multi-billion-real package that bypasses the constitutional spending cap to boost social spending and fulfill campaign promises.

Finance Minister Fernando Haddad had previously indicated the proposal would be unveiled this month, possibly even before the central bank’s rate-setting decision on Wednesday.

However, in an interview with local news website Brasil 247, Lula said it wouldn’t make sense to announce the fiscal framework and then travel to China.

“What I have been calling attention to is that we have to do things very carefully because we cannot lack resources for education and health,” said Lula, emphasizing that he would talk about the issue with Haddad during the trip. Lula will be in China from March 26-30.

Reacting to the postponement, interest rate futures closed higher at the short end of the yield curve.

Lula’s chief of staff, Rui Costa, said in an interview with TV GloboNews on Tuesday the framework would be announced in mid-April.

The possibility of the new rules limiting investments is already drawing criticism from members of Lula’s leftist Workers’ Party, even though their format is not yet known.

During the interview, Lula also criticized the country’s central bank, saying that an interest rate of 13.75% – its current level – is “irresponsible,” adding he will continue to fight the current level to stimulate the economy.

Brazil’s central bank has been holding its benchmark interest rate at a six-year high since September and, according to economists, is expected to maintain it unchanged at the Wednesday meeting.



All Right Reserved.  Buenos Aires Herald