South America27 September, 20263 min read
Inflation And Debt Burden Undermine Lula’s October Reelection Bid In Brazil
This article is an automated aggregation of coverage from news outlets. Our editorials offer in-depth analysis curated by the NewsCord team.
Debt burden affects about eight in ten Brazilian families. Rising food prices and cost of living undermine Lula’s reelection bid.
5 outlets told this the same way.
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Debt and the vote
Brazil is heading toward the October presidential elections with inflation at 4.2% and international reserves of about USD 374 billion, but Diario Neuquino says a significant portion of the population does not perceive improvement in daily life. Diario Neuquino reports that more than eight in ten Brazilian families have some type of active debt, and it adds that households allocate between 29.6% and 33% of their income to debt payments. Diario Neuquino says the reference rate sits at 13.75% and that the Central Bank maintains a restrictive monetary policy in response to fiscal imbalance and rising public debt, while the same article frames household indebtedness as an electoral battleground for President Luiz Inácio Lula da Silva against Flávio Bolsonaro.
Diario Neuquino quotes the Secretary of Economic Policy of the Brazilian Ministry of Finance, Guilherme Mello, acknowledging that many households use credit cards as an extension of their income to pay essential expenses, generating a revolving debt dynamic that is difficult to reverse. Diario Neuquino adds that the Fundação Getulio Vargas warns that when a family spends about a third of its income on financial commitments, there is less money available to consume, with consequences for economic activity.
Voters feel squeezed
Kleyton Zacarioto, working near Sao Paulo’s historic center, says customer traffic has been slowing for years because of a long period of rising food prices, and he says the squeeze on household budgets has turned him against President Luiz Inacio Lula da Silva’s bid for a fourth term. Zacarioto tells Reuters that “Someone who earns a minimum wage has no way to get ahead,” and he adds that Lula is the only candidate he knows he will not vote for. Lula promises voters, “I know it’s still not great, but I guarantee inflation will stay under control,” while the Reuters account says polls show a neck-and-neck race between Lula and Senator Flavio Bolsonaro.
The Reuters account says nearly half of Brazilians say the economy has gotten worse in the past year, according to a Quaest poll published in September, compared with just 19% who say the economy improved. Felipe Nunes, founder and CEO of the pollster Quaest, says, “Voters judge the economy by their ability to pay bills, consume goods and services, and achieve their personal goals.”
Campaign responses and risks
Lula’s campaign pushes back against Senator Bolsonaro’s claims about prices with a website dubbed “Market of Lies,” and it files a complaint in the Superior Electoral Court accusing the senator’s campaign of lying about prices. The Reuters account says Lula rolled out measures with two weeks to go before the first round, including a 15% increase in a landmark welfare program that will take effect before the second-round vote in late October. The Reuters account also says Lula announced an executive order banning online betting from October 6, as the cost-of-living debate intersects with household debt service and consumer sentiment.
Thomas Traumann, a political analyst and author, says, “The fact is that everyday folks just don’t agree with that,” referring to the claim that big macroeconomic figures show a good government. Marcelo Neri, an economist at Fundacao Getulio Vargas, warns that when people factor in “cumulative food inflation, interest rates and online betting,” the result is “a draw with a lot of goals scored on both sides.”