On January 1, 2023, Brazil faced a new political era as Luiz Inácio Lula da Silva prepared to take office while Jair Bolsonaro had spent weeks in near silence. The outgoing president’s decision not to seek re‑election, coupled with health troubles such as erysipelas on a leg and abdominal discomfort that led to hospitalization, intensified the sense of an end of an era and a transition that would redefine the country’s stance in markets and policy circles. Lula’s transition team carried the weight of a campaign promise to expand social programs, even as Brazil, home to about 33 million people living in hunger, confronted a volatile fiscal environment and high expectations for social spending.
Before the second round, Lula spoke of fiscal responsibility while also championing social responsibility. His pledge to govern for all carried an emphasis on prioritizing those in greatest need. The message to financial markets was unmistakable: spending would be scrutinized, but social needs could not be ignored. The looming question for investors became whether Lula could reconcile expanding social programs with budget discipline, a tension that sent warning bells through the economy.
budget brake
The incoming administration faced a government known for its diverse alliance and a political center leaning toward restraint. A constitutional reform was proposed to finance programs, including a proposed monthly benefit of about 110 euros for millions in need. When Lula’s predecessor faced impeachment in 2016, Congress had acted swiftly to require automatic budget updates, linking them to inflation. If Lula hoped to preserve or extend Bolsonaro-era benefits for electoral reasons alone, he would need roughly 20,000 million dollars not yet accounted for in the 2023 budget approved by the legislature. Transition leaders sought solutions that would satisfy both markets and social needs. By 2026, the reform tentatively named the PEC (transition) could usher in consecutive deficits and create pressures such as higher borrowing costs, rising inflation, and slower investment. The vice president, Geraldo Alckmin, indicated that Congress would have the final say on the proposal, underscoring the political tightrope Lula’s team would walk to avoid an early misstep.
Officials aimed for a cooperative relationship between the government and Congress. In the days surrounding the transition, initial discussions suggested that collaboration would shape the early phase of Lula’s administration. Acknowledging market skepticism, the transition team signaled a careful balance between practical budget constraints and the social agenda promised during the campaign. The search for an economy minister began, with the field narrowing as market responses to early proposals were digested. Guido Mantega, Lula’s former finance minister who had become a stabilizing figure during the transition, stepped back from a central role due to concerns from financial markets, illustrating the delicate nature of the process.
military factor
Twenty years earlier, Lula’s first presidency unfolded with ministers announced gradually, a slower but steady transition. In Lula’s recent term, however, the military dimension moved from the periphery to the center in the Bolsonaro era, with the armed forces occupying multiple defense and state roles. Former Lula ally Aloizio Mercadante noted that a civilian leadership would be appointed to the defense portfolio, a shift intended to restore civilian oversight and reduce the influence of the military on policy. Yet, the Brazilian Intelligence Agency, Abin, had become entangled in the political dynamics of the Bolsonarismo, a reality Lula’s team would need to navigate. The question lingered: would the next government reassert civilian primacy over the security apparatus and intelligence services?
On the streets, political tensions remained palpable. After election day, a faction of right‑wing groups continued to mobilize in support of the military’s role in politics, with some protesters even requesting a more overt intervention from uniformed forces. The public discourse underscored a broader debate about the balance between civilian governance and military influence, a debate that would shape acts of governance and public perception in the weeks and months ahead. The evolving landscape highlighted the fragility of political settlements and the importance of clear, principled leadership as Brazil prepared for Lula’s January inauguration and the challenging fiscal path that lay ahead. These questions—about civil‑military relations, budget discipline, and social protection—were central to the early storyline of Lula’s presidency and its hopes for stability and growth.
Related posts:
Bolsonaro Returns to Brazil: Security, Strategy, and Legal Scrutiny in the 2026 Countdown Brazilian Election Dynamics: Lula, Bolsonaro, and the Move Toward 2022-23 Center-Right Coalitions Crisis Deepens Between Israel and Brazil Over Gaza Statements and Diplomatic Moves Brazil 2024 Presidential Race: Polls, Stakes, and the Runoff Dynamics Lula’s Early Presidency: Balancing Hope, Power, and Policy in Brazil Bolsonaro vs Lula: Brazil’s Election Ahead and the Stakes for the Nation New Opportunities in Global Diplomacy Bolsonaro Sees January Momentum Amid Election Tensions in Brazil Lula and Alckmin Unite: A Strategic Pivot in Brazil’s 2022 Political Landscape false Brazil’s pivotal presidential election tests Lula and Bolsonaro Lula Widens Lead in Brazilian Presidential Polls as October Vote Approaches