Brazil: Mounting Pressure for Haddad’s Fiscal Framework

Can a BRICS inflow stave off growing signs of a coup?

Don’t you expect
Income with so much outcome
— Kendrick Lamar, “Untitled 03”

Three months into his mandate, Lula’s Minister of Finance, Fernando Haddad, presented his long-awaited economic white paper, the “Arcabouço Fiscal”. Aimed at bypassing the previous the 2016 Constitutional Amendment 95, the intention of which was none other than inducing an economic contraction, Haddad has had to think strategically. His fiscal policy framework veers from head-on confrontation with the predatory financial policies that have plunged half of the population into unemployment and hunger. 

Justification for constraining government investment in social programs by the Constitution was the allegedly economic crisis ensuing from then President Dilma Rousseff’s second mandate. In hindsight, her impeachers mixed up crisis with confusion. What a downturn in the internal commodities market had to do with the “Lava Jato” court of exception, established with help from the U.S.-DOJ, is still an unfinished chapter in Global South class struggles. While lawfare destroyed some of Brazil’s most successful mixed-economy strategic-sector corporations, Amendment 95 plunged the country’s new consumer class into panic. 

After the initial loss of capital for Petrobras, Electrobras, Odebrecht, Engevix, Eletronuclear and Embraer, privatization and restructuring propped them again. Capital flow then changed destinations, ending up in the pocket of private investors. Other devastating pieces of legislation were to follow after Rousseff’s ouster. With Amendment 95, the coup plotting Congress capped government spending at zero above inflation for twenty years. Then came the so-called reform of workers’ rights, disempowering them of benefits and protections while eliminating compensation in case of unemployment. Finally, a social security reform set the legal pension limit to an age at which more than three quarters of Brazilians tend to rest in ashes. 

The afterlife awaits especially those enduring some of the most exploitative working conditions anywhere on the planet. What might surprise liberals is how these pieces of legislation were passed by 2017, a full two years before Bolsonaro and Guedes assaulted State coffers and gutted public institutions.


After decades of building barriers to secure wealth from being redistributed to society, Brazil’s upper classes are now testing their efficiency. Political and economic history has largely been that of the struggle of those who accumulate and concentrate wealth against the rest who are deprived of it. As a brute economic fact, this is a mystery to nobody. What determines how it gets filtered through to the public derives as much from political action as legislative strategy. Its modus operandi points to tact, in what game theorists tend to cover up and over with win-lose, zero-sum-gain or lose-lose jargon. President Lula’s diplomatic empathy aims to stake it all on nothing less than a win-win gambit. As he succinctly put it during his campaign, he aims to include the poor into the budget and the rich into paying income tax. 

None of this changes how he relies on partners who prance about with their autocratic laurels and police badges in place. Beyond them lies something even more stubborn: the civilian Bolsonarist upper echelon, fanatical libertarians whose explicit objective is to undermine Lula’s government. Their current leader is President of the Central Bank (BC), the American-educated financial operator, Roberto Campos Neto.

Libertarians once used to deride political leaders whose extended rule appeared to succeed through the cult of personality. Mao, Stalin, Castro, Chavez or Gaddafi… None were fit to rule on a planet galvanized by enlightened democracies. More recently, their progeny is those who have brought you the war on Putin. Still, political trends shift faster than fashion or management doctrines. As the tide turns, libertarians now try their own hand at stifling electoral processes by fostering personality cults of their own. Seduced into a vote for Macron, now bite the billy club. Opted for Biden, so stop conspiring. Charmed by Trudeau, then keep on truckin’. As for Lula, that’s all you’ll get. After four years of the Bolsonaro and Guedes’ privatization assault on public wealth, Brazil’s GDP more than ever stems from rentier products, the grandest of which is compound debt.

This debt begins at the level of private banks as its monies move with the additionals governments spend on payroll and invest in infrastructure and services. Depending on who holds the controls of a central bank, what governments end up owing to private banks is largely determined by the prime interest rate (PIR) embedded in all financial transactions. Only for libertarians is the PIR anything but taxation. If it still makes sense to call China a communist country, it is because all banks report to and are owned by the State. On paper at least, this prevents the State from intentionally driving the working public into debt. 

In Brazil, even so-called “public” banks have to calibrate their interest rates according to directives from the highly touted “autonomous” Banco Central (BC), regardless of what the Executive branch of government decrees. Thus arises a contradiction critical enough to erode social harmony. For who controls the BC is none other than financial capital, the expertise of which responds primarily to its own interests. There lies a direct link between policies espoused by the BC and the rampant inequality in a country comparative economic data ranks as the most unequal in Latin America. 

In turn, exaggerated financial reports on inflation, based on transforming debt into assets, weakens the capacity of any State to fund the polity. Given the ambition of venture and hedge fund capitalists to privatize any property held by the public or the commons, one is led to ask what does “liberal” democracy still stands for? Freedom for those who barely have enough to eat? Property rights preserved for the masses on commodities and land that do not valuate, and are thus worth next to nothing? Life expectancy that grows only provided one buys into a luxury health plan granting prescriptions to spend weeks on a yacht? 

By examining exponential curves in wealth concentration, one can only conclude how liberalism and the market have long been undermined by deregulation. That extends above all to nations fortunate enough to first experience an egalitarian economic revolution of some sort. For Brazil, industrial potential is ostracized by invisible mechanisms manipulated by archaic feudal and cast structures, best represented by agribusiness. The latter is the only sector to reach its potential. With 24% growth in 2020, agribusiness represents roughly a quarter of GDP. Libertarians abhor the word inequality. Even more painful to hear is the term surplus when applied to labor. To cancel both of these terms, libertarians dominating the FIRE sector are prepared to go the distance to jettison their freedoms and censor economists as they compile indicators and stats. With their hive of Aryan-nation Instagrammer financial analysts, corporate media all too eagerly comply with such filtering strategies. Countering their obstructions, it is the country’s economic scholars who tirelessly lead the vanguard of resistance against such Bolsonarist market makers.

Well-intentioned souls might still believe competition can exist between monopolies, whether in tech, banking or oil. As for democratic processes, “universally representative” only at the rarest of times, libertarians willingly confuse privilege with measures by which to keep society from enjoying the common good. In fact, liberalism in Brazil displays little of the glorious bourgeois history at times associated with the names of John Locke and William III of Orange. Yet, even prior to ushering liberalism into Britain, the autocrat’s fanatical militia crushed the “true freedom” of radical Spinozists in the Dutch Republic. While it could still vouch for a universalist promise, liberalism never shied from letting the blood flow.

 Metamorphosis of its principles emerged by following the money trail. Already libertarian as its flag justified endless waves of land theft from future colonial subjects, human rights have not been of its creation. As the doctrine of discovery meant to defend special interests and make private property sacred, what liberalism has grown into are market mechanisms. These ensure that wealth reaped from industrial production never returns to its source in the working masses. 

Under the strain of debt, no fortune was ever built from a salary. As it spreads in Brazil, libertarianism still chooses not to say no to slavery, rape, food destruction or neocolonial extraction. Let alone does it renege on ripping out forests for mining, spraying crops with cancer-producing chemicals or saturating the air with fossil fuels. Its affinities with fascist authoritarianism and Nazism burns the road whose horizon still and forever beholds equality. Nowhere is fascism more actively a threat today than in the libertarian tropical paradise called Brazil. 


Early last week, Minister Haddad’s fiscal strategy was perceived as trying to convince the dominant classes they have everything to gain by investing in the country’s productive future. Although not seeking to repeal the Constitutional Amendment, the Framework nonetheless aims to be voted as a special law by Congress. By week’s end, his proposal sought to avert open confrontation with them. In the longer term, the Minister seems to be hedging his bets on the benefits of outside pressure, namely from Lula’s commercial allies in Asia. Although set on investing tens of billions of dollars in the country’s lagging industries, it will take time. However, the economy needs urgent attention, and the government needs to sidestep the constraints brought about by Amendment 95.

Last November, Lula’s transitional team picked up a country whose fiscal space had collapsed. True to his win-win spirit, he enlisted a broad range of allies to draft a bill channelling emergency investment to a society devastated from four years of a fascist culture of bible-thumbing police-fostered violence. As a compromise, though, the Fiscal Framework first hugs the 2016 Spending Cap almost lovingly. Should there be no growth in GDP in 2023, there will be no increase in government expenditures. Forecasts are tentative regarding spontaneously created real growth in production, despite how industry has hovered below its potential for half a decade. In this context, as in all, spending must be seen for what it is: investment. The country’s enormous working classes are the ones who can make the economy move, first by producing, and then by consuming. The BRICS can prompt an increase in effective and aggregate demand, but once wealth has ceased to be hoarded at the top. 

According to the Framework, government cannot exceed 70 percent of the spending made in the previous fiscal year, no matter how much GDP grows. That said, any increase in spending has to cap at 2.5 percent in relation to GDP growth in the previous year, albeit it cannot drop any lower than 0.6 percent, with both parameters adjusted for inflation. GDP growth exceeding 3 percent will have to be shaved off and service the public debt, save for spending on education and health. This is where the tension builds. Amendment 95 capped spending on education and health as well, thus overriding the funding scheme guaranteed to them previously by the Constitution itself. To satisfy private capital, Haddad has committed to surrendering any surplus above the spending limit to austerity. 

Given that education and health were areas singled out to be gutted by Bolsonaro and Guedes’ Chicago School elucubrations, Haddad’s hand might have strengthened. When it does vote on the Bill, Congress cannot morally reject this prevision. After all, the catastrophic result stemming from the libertarians’ defunding schemes had depleted vaccine stocks of all kinds, this in a country historically at the cutting edge in biomedical research. In turn, subsequent to their attempts at destroying Brazil’s Master’s and PhD programs, dozens of top scholars had to seek shelter in G7 zones. Now the funding scheme for health and education returns to the Constitutional forum, where it belongs. 

As stipulated in the 1988 Carta Magna, health must receive a minimum investment of 15 percent in relation to State revenue, whereas education tallies at 18 percent. On April 19, Lula received the Chancellors of Brazil’s federal higher education institutions, awarding them collectively a host of investments already rising to BRL 3 billion. How further funding is to emerge for these areas is what heats the debate on boosting industrial production. It might seem odd that a government would have to struggle to achieve such growth. Welcome then to Faria Lima, Brazil’s Wall Street, represented by some key Open Society members from the Soros clan, dubbed by the country’s complicit media puppets as “the market”. 

By claiming to apply economic fundamentals of high-interest rates to combat arbitrarily targeted inflation, the BC represents not so much the bank sector’s armor as its depleted-uranium plating. For who, one might ask, has most to lose from inflation? Consumers, no doubt, and even those whose source of income oscillates with the price of commodities. However, nobody tends to lose more than those who reap the gain from dividends, money, stocks and its derivative products. As such, shared boardroom spaces have long replaced revolving doors, as made clear in a leaked conversation between Campos Neto and a leading banking executive over what prime interest rate is most desirable for those making the “market”. That said, irrational behavior sparked by lobby-group irrationality can become contiguous when circulating within Congress. For those in business who actually believe high-interest rates do anything but harm them, going bankrupt might well be the best they can do to contribute to society. 

As for the financial cast, lowering the PIR is the very last item to add to their wish list. After all, indebting the population amounts to paying off the CB’s stakeholders, with themselves first in line. As economist Michael Hudson has repeatedly emphasized, the country’s financial class is singularly nationalist insofar as it makes sure that those who strip society from the wherewithal to grow are Brazilians themselves. Unhappy with a 13.75 percent benchmark interest rate per annum (the so-called “Taxa Selic”)the Committee on Monetary Policy (COPOM), of which Campos Neto is also the head, has even threatened Lula with doubling it. It all comes down to playing monopoly in a rules-based world.  

Still, economic scientists have grown restless with financial discourses stripped of data, stats, and graphs. This applies as well to Haddad’s fiscal framework. For it is all nice and well to promise to intensify auditing of unpaid corporate tax and fiscal flight, policing white-collar crime requires even more public investment. That is why those who ought to pay are the wealthy themselves, specifically through a tax on capital. Yet for the time being, the Minister has been silent.

According to the BC’s media agents, the so-called market requires the 13.75 benchmark in order to “decelerate” the economy. The only problem is that, since 2015, Brazil’s economy has been forced to operate far below its potential. Its GDP dashed to sixth in the world by the end of 2012, only to sink by six positions since then. Inflation at 5.6 percent is hardly a number to warrant such a high PIR, let alone one that is the highest in the world. Either Campos Neto’s textbooks apply to another country, or they are outdated. In either case, he is wrong. Unless, of course, the so-called elite he represents simply does not want the economy to grow.

 Unsurprisingly, indicators show how BC policy matched with libertarians running the executive branch of government maintains the country as a risk-free tax haven, one built upon the bloody backs of its 150 million poorest residents. Were the inspiration behind Haddad’s Framework meant to rally acceptance by a Bolsonarist-dominated financial sector, the Minister could soon find himself in a bottomless fiscal pit. Rescue would then stipulate further concessions on government investments. And Lula’s attempts at urgently spiking economic production would then be in jeopardy.


Then there is Minister Haddad’s gambit for a broad outward swing in real economik. With former-president Dilma Rousseff now at the helms of the Shanghai-based BRICS’ New Development Bank (NDB), economic growth seems to be guaranteed for the midterm. Nonetheless, projections are not optimistic for the short. Even though GDP growth saw a steady decline during Bolsonaro’s last year in power, finishing with – 0.2 percent by Q4, its cumulative rise held to 2.9 in 2022. Corporate media will flex their muscle by letting nobody forget that rate is higher than current projections.

 Through its focus on development, the government aims to prove to society how brighter days do lie ahead. Whether this materializes depends largely on how quickly BRICS-related investors interested in building up the manufacturing sector be allowed to set foot in the country. In the words of former NDB vice-president, Paulo Nogueira Batista Jr., the bank’s differential is to aim for “mission-orientated economics”. What the PT hopes for with its broad alliance in Congress is to rally up enough opposition to the BC President’s tactics. With Senate President Rodrigo Pachedo indiscreetly humming the tune on April 19, this might just be happening. Ousting Campos Neto requires a vote in the Senate, in which fiscal pragmatism would have to prevail against the Bolsonarists’ rentier ideology. 

As a boost to immediate funding, social and moral pressure can surely be exercised on the still intact state-owned oil monopoly, Petrobras. Since the sell-off of refineries orchestrated by the libertarians, returns from Petrobras flow overwhelmingly into the hands of oligarchs through tax-free dividends. Here, the libertarian truism about privatization’s trickle down return to the general public has never been more of a lie. However, this outflow results from decisions drafted by its current board, another strategic domain occupied by Bolsonarists. From a congressional point of view, as it is still owned by the State, Petrobras owes its profits to society. The challenge is to rally representatives and senators to oust its board of directors as well.

In the second year of the pandemic, the non-financial retail sector benefitted tremendously from the spending caps. Shooting up by 5.2 and 4.2 percent in 2021 and 2022 (source IBGE), the sector grew faster than industry and agribusiness. Yet, the cream of this microeconomic growth ended up back with the banks, once again due to high-interest credit and loan policy. Meanwhile, from a macroeconomic perspective, Bolsonaro’s government tried to extend his devastation of public coffers by filling the pockets of citizens in a bid for them to vote for his re-election. As his financial operators continued to weaken strategic sectors through relentless privatizations, the oligarchs shut their mouths about public spending. 

From the libertarian point of view, macroeconomics ought to determine how much, and not whether, government investment must decrease. Predictably, the accounting by which such spending is tallied seldom includes the judiciary or the military. As lain out in textbook fundamentals, prosecutors, judges, generals, and admirals simply do not belong to the civil service. Those are the same textbooks explaining how job security has been lost “due to competition on a global scale”. Tax policy has been shifted from the corporate class to workers “so as to create more jobs”. Government funded services have been gutted “through respect to the inalienable principles of human freedom”. While State utilities have been privatized “in order to make management more efficient”. 

Indeed, by blaming workers for inflation, the oligarchic sector exposes a class bias skipping over even the interests of the bourgeoisie itself. At the end of the day, the main obstacle to Haddad’s Fiscal Framework is clearly the Bolsonarist bulwark of the Central Bank. In the name of its “autonomy”, the BC has long extorted the working and middle classes by allowing banks at the local level to impose unjustifiably high-interest rates on overdrafts, credit and loans. 

A pattern emerges similar to European-Union member states, with France already proving the point as police violence is unleashed to quell demonstrations against economic breakdown. The alliance of libertarians with the far-right is the dominant sectors’ joker card whenever the crisis created by their policies sets the stage for a general social uprising. In its Brazilian variant, libertarians refer to themselves as “liberals” and clash with social-democratic liberals they accuse as “communists”. In a battle over what they call “values”, libertarians disguise their wealth hoarding through the ideological buzzwords of privatization and austerity.  

Back in the 1980s, Euro Libertarians managed to blame progressives once loyal to (Euro) Communist Parties for the rise of the far-right. As they now mate with fascists in haste to keep the Liberal Left out of elections, liberals prove to be unreliable narrators. That said, dominant sectors would do well to recall what they learned of history, philosophy, and sociology in the private schools at which they were fortunate enough to study. Instead of rallying around class interests sourced in slavery, exploitation and extraction, they would do well to remember how the soundness of rational thinking is measured by the recognition received by those most distant from its effects. Otherwise, thought loses touch with reason itself.  

As for the lure of the BRICS, even the BRL 62 billion Lula brought back in contracts has the oligarchs still on edge. As their power and privileges have always been guaranteed by the United States, their rejection of a boisterous economy is as obvious as their greed. Neither of them wish for surplus labor to transform into political demands through increased purchasing power. To be sure, few within the PT itself are celebrating. Although party-members regret the BRL 75 billion cap on spending (roughly USD 25 bi), worries arise over how this Framework might backfire on Lula. The legal obstacles mounted by his predecessors, Temer and Bolsonaro, are closely observed by the four-star generals and admirals. They still bring subterfuge to the democratic process by showing off their firepower and parlaying renegade intellectuals to rub in some pseudo-liberal polish to their rusting ruse.

On the sidelines, Haddad seems to have opened an inner margin between macro and microeconomics, while Lula prudently observes his flanks. And observe he must. Timed as a greeting from Uncle Sam upon his return from China on April 17, when he also informally hosted Russian Foreign Minister Sergey Lavrov, the U.S. State Department openly criticized Lula’s hope for peace in Ukraine. Almost simultaneously, its financial arm, the IMF, voiced approval for the Bolsonarist-sponsored benchmark interest rate. It merely confirmed what we all know: autonomy for a central bank in a democracy running on libertarian principles has only ever meant subservience to a foreign master.

Norman Madarasz, Ph.D., is professor of political and economic philosophy at the Pontifical Catholic University of Rio Grande do Sul (PUC-RS).


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