Brazil's most recent cabinet reshuffle has left Finance Minister Fernando Haddad without strong backing from President Luiz Inacio Lula da Silva's inner circle due to his moderate fiscal stance. This has raised concerns about a potential shift towards populism to bolster the older leftist leader's popularity.
Haddad, known for his clashes with cabinet members advocating for increased spending despite the stable economy and rising inflation, relied on outgoing Institutional Relations Minister Alexandre Padilha for support in policy debates and negotiations with a predominantly conservative Congress.
The appointment of Padilha as the new Health Minister and Gleisi Hoffmann, an advocate of state-led economic stimulus, to replace him, emphasizes the diverging views within the government. Hoffmann has criticized the Finance Ministry's austerity measures and the central bank's monetary tightening, contrasting with Haddad's stance on the need for economic moderation.
The government's inclination towards spending to drive economic growth has created discord within Haddad's party, making it challenging for him to prioritize spending cuts. The internal resistance against Haddad's fiscal agenda is led by Chief of Staff Rui Costa and Mines and Energy Minister Alexandre Silveira.
Despite facing criticism and dwindling influence as Lula's term progresses, Haddad remains committed to his responsibilities. While receiving support from some quarters, his policy approach and focus on fiscal improvement have drawn skepticism from others in the private sector.
The rift between proponents of increased spending and Haddad's economic team is a common dynamic in governance, but the prevailing sentiment within the current administration is that the economic team is losing ground more than usual, according to economist Roberto Ellery.