Luiz Inácio Lula da Silva’s third term has shown signs of economic growth, a decrease in the unemployment rate, and an increase in the minimum wage, according to an assessment by economist Paulo Nogueira Batista. In 2026, Brazil records a primary deficit equivalent to 0.8% of the Gross Domestic Product (GDP), while net interest expenses amount to 8% of the GDP, reflecting ongoing fiscal imbalances.
The new Brazilian fiscal framework is characterized by greater flexibility compared to the former spending cap from Michel Temer’s government, yet it maintains significant restrictions on social spending and public investments. Paulo Nogueira Batista criticizes current monetary policy, especially the interest rates set by the Central Bank of Brazil (BCB), which he believes are not aligned with a sustainable economic development agenda.
Furthermore, the economist points out that the structure of the Central Bank still favors a close relationship with the financial market, creating an environment that restricts investments and burdens credit for productive sectors. He highlights the absence of a quarantine period for directors leaving the monetary authority to join the private sector, mainly banks and consultancies, which raises concerns about conflicts of interest.
Paulo Nogueira Batista also notes the lack of solid progress in Brazilian reindustrialization, a phenomenon attributed to the rise in interest rates and the trade liberalization practiced by the country. In terms of trade, the agreement signed between the Southern Common Market (Mercosul) and the European Union was classified by the economist as unfavorable both for the national industry and the agro-export sector, compromising local competitiveness.
On the international stage, Brazil did not take advantage of the BRICS presidency (a bloc formed by Brazil, Russia, India, China, and South Africa) in 2025 to promote significant advances in monetary and financial areas, as highlighted by Paulo Nogueira Batista. Still, he recognizes that the country has high geopolitical potential, based on its territorial extension, population, and economic size.
The global scenario also presents challenges with the crisis in the Middle East, which caused partial blockades in the Strait of Hormuz, affecting the international flow of oil and gas. In this context, Brazil, as a net oil exporter, may benefit from the rise in prices on the international market, positively impacting its trade balance and external revenues.
Moreover, the Lula government has been promoting tax changes focused on increasing revenue from higher-income segments. However, the economist draws attention to the coexistence of contradictory economic policies, combining incentive measures with restrictions inherited from the previous administration, which hinder a more robust growth recovery.
According to Paulo Nogueira Batista, the fiscal targets established are overly ambitious, generating recessive pressures on the economy. Within this framework, he highlights the contradiction between the official discourse of reindustrialization and the actions of economic sectors that resist this agenda, making the implementation of coordinated productive policies difficult.
Finally, the economist advocates for a review of the current fiscal framework, encouraging a more aggressive public investment policy and changes in the decision-making core of economic policy for Lula’s possible fourth term. He also remarks that although Beijing follows its own interests, it has not directly driven Brazilian productive reorganization, which reinforces the need for more assertive internal strategies.
The conclusion of the economic process still depends on adjustments in Brazilian fiscal and monetary policies, which should be analyzed by authorities in the coming months to define the direction of the country’s sustainable development.
