Brazil’s cabinet reshuffle has left Finance Minister Fernando Haddad without strong allies, amidst fears of a leftist shift in policy. His moderate fiscal stance is contested by new allies of President Lula who advocate for increased government spending. This internal division comes as inflation rises, potentially jeopardizing Lula’s approval ratings while Haddad maintains a commitment to his economic agenda despite growing opposition.

Brazil’s recent cabinet reshuffle has left Finance Minister Fernando Haddad isolated in President Luiz Inacio Lula da Silva’s administration, raising concerns about a possible shift toward more populist policies to bolster the elderly leader’s dwindling popularity. Haddad has faced opposition from cabinet members advocating increased spending, despite the economy showing signs of strength and inflation on the rise.

The cabinet changes, announced on Tuesday, led to the departure of Institutional Relations Minister Alexandre Padilha, who had previously been a supporter of Haddad’s moderate fiscal stance. His position was assumed by Gleisi Hoffmann, the president of Lula’s Workers Party (PT), known for her strong support of state-driven economic initiatives, directly opposing Haddad’s policies.

Hoffmann has publicly criticized what she perceives as Haddad’s austerity measures and the central bank’s tightening of monetary policy, while Haddad acknowledges the necessity of tempering economic growth to maintain balance. Experts suggest that despite Haddad’s private acknowledgment of dwindling support within the party, he remains committed to fulfilling his responsibilities as Finance Minister.

The cabinet shuffle has intensified division among supporters of Lula’s administration, particularly between Haddad and his critics, which include Chief of Staff Rui Costa and Mines and Energy Minister Alexandre Silveira. Inside sources report increasing animosity toward Haddad among colleagues who emphasize the importance of economic spending, further complicating Haddad’s position.

Although some officials at the Finance Ministry believe in maintaining Haddad’s economic agenda, others express skepticism concerning his fiscal strategies. Haddad has defended the recent primary budget performance, highlighting that the 2024 primary deficit has improved, although it remains below previous year’s surpluses achieved under former President Jair Bolsonaro.

Nevertheless, critics assert that Lula’s administration has imposed permanent higher spending levels while relying on uncertain revenues to mitigate public debt, which has seen little stabilization despite positive economic indicators. Market confidence remains intact, with the Brazilian real showing recovery against the U.S. dollar; however, tensions surrounding fiscal policy persist within the government.

As Haddad prepares to introduce new measures aimed at stimulating economic growth while the central bank raises interest rates, the current dynamic reflects a typical governmental struggle between spending priorities and economic discipline. Experts note that ongoing friction is a familiar pattern amongst official circles in any administration, albeit the sense of imbalance appears more pronounced under current conditions.

The recent cabinet reshuffle in Brazil has highlighted the isolation of Finance Minister Fernando Haddad as he navigates opposition from within the government concerning fiscal policy. With Lula’s administration leaning towards increased spending and economic stimulus, Haddad’s moderate approach faces significant challenges. Despite these tensions, Haddad remains committed to his role, as indicated by ongoing market stability and potential stimulus measures on the horizon.

Original Source: www.usnews.com

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