Lula Is Running Huge Budget Deficits and Scaring Off Investors
- Deteriorating fiscal outlook has hit inflation expectations
- Brazil has lost influence in global markets amid malaise
This article is for subscribers only.
It’s been almost two years now since Luiz Inacio Lula da Silva secured his return to power in Brazil. For investors, they’ve been bleak. The currency is down, government bond yields are up and the stock market has only eked out half the gains posted across the rest of emerging markets.
All this stands in stark contrast to Lula’s first presidential stint two decades ago. Back then, he became the unlikeliest of Wall Street darlings — a radical union leader who shocked pundits by quickly embracing fiscal austerity — and oversaw a furious rally in the country’s markets. The main stock index posted average annual gains —in dollars — of 38% during his eight years in office.