‘Market considers both candidates bad, each in their own way’, says Stuhlberger, about election

Like much of the financial market, the manager Green Asset has been working with a scenario of a narrow victory of Luiz Inácio Lula da Silva (PT) compared to Jair Bolsonaro (PL), in the October elections. It could be a promising sign, as one of the most important conversations that Luis Stuhlbergerpresident and founding partner of the company, says he had in his life as a resource manager was with the former minister Aloizio Mercadantein 2002. Stuhlberger says he realized in the dialogue with the advisor of the then candidate Lula that the PT government would not be as bad as the market expected, he bet on Brazil’s growth and Verde had one of the best returns in its long history of successes .

But a few days ago, Stuhlberger had dinner, alongside other businessmen, with Lula. He saw that the former president (and candidate again) had a look of who he believed in what he said: the idea is to increase the minimum wage so that the population returns to consumption, entrepreneurs earn money and the economy grows. “He is serious and wants to improve Brazil, within the vision he has,” said Stuhlberger, at a Verde event, this Tuesday morning, 28.

The problem is the after-effects that good intentions hide, as the chief economist at Verde Asset has shown in figures, Daniel Leichsenringin an event to commemorate the fund’s 25th anniversary this Tuesday, 28. The increase in the minimum wage by 80% in real terms under Lula’s government and by 10% under the government Dilma resulted in the explosion of the public deficit, due to the impact on Social Security. For this and other reasons, the country, as is known, fell into insolvency at the end of Dilma’s government.

Added to the increase in the number of civil servants, the public credit offered via BNDES and the use of state-owned companies (which have in the explosive indebtedness of Petrobras their best-finished example), the conclusion was that public money was misused, according to them. “We have come to the end of this period with the same problems of misery, education and health and inequality,” said Leichsenring. “The PT disaster had, as a delayed consequence of the misallocation of capital, Brazil growing 0.5% less than Latin America.”

Not that the alternative at the polls is better, according to professionals at Verde. In the same way that Lula, Bolsonaro and the current Congress want an end to the spending ceiling. The president also works against the Fiscal Responsibility Law and attacks the reforms made in the government Michel Temer, who tried to push the country away from the brink of insolvency. “Although the two (candidates) are bad for the fiscal, the PT government was worse, without comparison”, said Leichsenring.

For Stuhlberger, unlike previous post-redemocratization elections, this one is not considered binary, in the sense of candidates more to the left or to the right. “The market considers both candidates to be bad, each in their own way.”, he said. “On the streets they say: ‘it’s a psychopath against a well-meaning incompetent’.”

Although the perception of a “return to the past” is great, an eventual new Lula government will have challenges that the first one did not face. One of them is the greater “parliamentarization” of the government, with the Congress more powerful in relation to the figure of the president, mainly with regard to the Budget. Parliamentarians today limit the president’s vetoes and have imposing amendments, which give them greater discretion. “If Lula is elected, there will be a big fight between hyper-presidentialism and the strongest parliamentarism, represented by (the president of the Chamber) Arthur Lira (PP-AL)”, said Alexandre Marinispolitical analyst, who participated in the event.

Another challenge is the fact that Congress is more liberal, from an economic point of view, than faced in previous PT administrations. The party also knows that it will be necessary to place an anchor on public spending, in place of the spending ceiling. For Verde, the discussion of a tax reform, with tax increases, will also be inevitable. This would include taxation of dividends and a new rate of income tax.

“If Lula wants to repeat what he did between 2003 and 2010 – which is to increase spending (even if not in the first few years) -, it will be a return to the past”, stated Stuhlberger. “We will have more inflation and we will be in a spaceship heading to the past and not to the future.”

For the manager, the third way lost timing application launch. The premature departure, in Verde’s view, of Sergio Moro made Bolsonaro regain his popularity early. The friction caused by the withdrawal of João Doria (PSDB) from running for the Planalto did not support the union around the third way. Simone Tebet (MDB-MS), in turn, would have taken a long time to launch itself as a candidate for the presidency.