Christmas is still nearly two months away, but the letters to President Luiz Inácio Lula da Silva have already begun arriving. Business leaders, fund managers and parts of Brazil’s financial press appear eager to set the priorities for his next administration, just days after the election. Their wish lists range from fiscal discipline and structural reforms to political moderation and restoring investor confidence. These are legitimate concerns that deserve serious consideration. But they raise a more fundamental question: why should Lula, preparing to begin his fourth presidential term, once again have to prove his credibility to economic constituencies that would have preferred a different electoral outcome?
Lula won reelection with 64.3 million votes, backed by a broad and diverse political and social coalition. That victory gave him a democratic mandate to govern, one that does not depend on the financial market’s endorsement. In his victory speech, the president had already pledged to govern for all Brazilians, including those who voted against him. That commitment means listening to competing interests, negotiating differences and building consensus. It does not, however, require abandoning the priorities presented during the campaign in order to accommodate the economic preferences of those who supported the opposition.
Brazil faces significant fiscal challenges, but its economy is far from the wreckage suggested by some of the more pessimistic interpretations. Unemployment has fallen to 5.2%, workers’ inflation-adjusted incomes have risen, and the economy continues to expand, albeit at a slower pace. At the same time, public debt requires careful management, investment needs to increase, and interest rates remain exceptionally high. With the public sector’s nominal interest bill exceeding R$1.2 trillion over twelve months, any serious discussion of fiscal responsibility must also examine how monetary policy affects government debt, credit conditions and economic activity. Sound public finances are essential, but fiscal balance cannot be treated as an objective divorced from economic growth and improvements in living standards.
There is something distinctly anachronistic about this latest round of demands. In 2002, Lula released his famous Letter to the Brazilian People, seeking to reassure investors about the prospect of a government led by the Workers’ Party, or PT, which had never before held the presidency. He pledged to honor contracts, preserve economic stability and keep inflation under control. Twenty-four years later, after three presidential terms, his economic record can be assessed through tangible results, both positive and negative. Demanding credible fiscal commitments and consistent economic policies is entirely reasonable. But Brazil should not have to endlessly repeat a ritual in which a democratically elected president seeks what amounts to a certificate of economic credibility from the financial establishment.
Investor pressure is part of a functioning democracy, just as demands from workers, businesses in the productive economy, consumers and social movements are. The press is equally entitled to advocate a particular economic approach. The problem arises when those preferences are presented as the only responsible choices available. Every fiscal policy involves decisions about who pays taxes, who receives subsidies, which expenditures are protected and whose interests must give way. These are not purely technical questions, much less matters reserved for a single segment of the economy.
Lula will have to confront these dilemmas and be held accountable for the consequences of his decisions. He should listen to financial markets, but also to the millions of Brazilians who expect jobs, higher incomes, better public services and more affordable credit. Governing for everyone does not mean satisfying everyone, particularly when their interests conflict. The letters are welcome as contributions to a national debate, not as instructions to the president. After all, financial markets are free to write as many letters as they wish. But they cannot rewrite the verdict of the ballot box.
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