Brazil’s president-elect Luiz Inácio Lula da Silva on Friday named Fernando Haddad, a loyalist from his leftwing Workers’ party, as finance minister, reigniting investor fears that the new administration is set to pursue a looser fiscal policy.
The appointment of Haddad, a political science professor who previously served as education minister, dashed hopes among Brazilian business circles that Lula would choose a more market-friendly politician to lead Latin America’s largest country. A bumpy few years are expected for the global economy.
“Politician Haddad’s choice shows that Lula sees negotiations with Congress as more important than enacting economic reforms,” said Adriano Laurenno of Prospectiva, a political consultancy.
Hadded is a longtime ally of the president-elect and is tipped by some to be his preferred successor. He is known for his wit and political decorum. Yet financial elites are wary of him — popularly known as Faria Lima, after a boulevard in São Paulo — who believe his focus on social justice will trump fiscal responsibility.
In an interview earlier this year, Haddad said the outgoing Jair Bolsonaro government’s focus on neoliberalism and free markets was “unsustainable”.
“38% of Brazilians only earn the minimum wage. If we don’t look at this side of society, if we only look at the stock market, profits, we applaud Bolsonaro,” Haddad said in an interview.
Haddad was born in Sao Paulo, Holds a master’s degree in economics and a doctorate in philosophy, and joined the Workers’ Party (PT) at the age of 20. Earlier in his career, he worked as an investment analyst for a bank.
2005 to 2012, He served as education minister, first under Lula and then under Dilma Rousseff. He was then elected mayor of São Paulo, but served only one term after voters rejected his bid for re-election amid a wave of anti-PT sentiment.
In 2018, when Lula was jailed on corruption charges and barred from running, he was picked as a presidential candidate against Bolsonaro. He lost by more than 10 million votes.
During the presidential campaign at the time, Haddad promised to raise the minimum wage, repeal a labor reform that benefited employers from workers, and suspend privatization — all policies close to Lula’s heart.
In this year’s election, he lost the race for governor of Sao Paulo, Brazil’s largest state, by 2.5 million votes to Bolsonaro’s right-wing ally Tacicio de Freitas.
The first challenge facing the new government is an ongoing struggle in parliament to pass a constitutional amendment that would allow Lula to fund his campaign pledge to increase social spending.
The amendment aims to increase the country’s statutory spending cap by 145 billion reais ($28 billion) to make room for maintaining the 600 reais monthly benefit payment for the country’s flagship Bolsa Família. The increase is valid for two years.
The move unnerved some investors and economists who feared the new government would abandon fiscal discipline.
Thierry Larose, a portfolio manager at Swiss bank Vontobel, said he expected other key positions on Lula’s economics team to be assigned to “market-friendly people”.
“Some technocrats should show that they still care about fiscal responsibility. But the priority is to support social spending for the poorest, and Keynesian-style policies may prevail,” he added.
Andrea Perfito, chief economist at brokerage Necton, said Haddad’s choice showed that Lula would not undertake any major economic experiments. “Lula’s desire to make Haddad his immediate successor in the 2026 election is open,” Perfeito said. “Lula will not take unnecessary risks on the economic agenda.”
On Friday, Lula announced that Flávio Dino, a senator-elect from the north-eastern state of Maranhão, would be justice minister; José Múcio Monteiro will act as defense.