Fiscal responsibility and social spending are not mutually exclusive, says manager

For the partner and manager of Galapagos Capital, Fábio Guarda, the recent speeches of Luiz Inácio Lula da Silva, in which the president-elect criticizes the restrictions on the spending ceiling, reinforced the fear for the financial market that the new government will not commit itself with fiscal responsibility and are what explains the collapse of the stock market and the soaring dollar this Thursday (10th).

“You can spend socially regardless of having social responsibility. It remains to know how to prioritize spending and spend better”, said Guarda in an interview with CNN 🇧🇷

“Historically, governments in Brazil are bad spenders; spend a lot and spend badly. And the market fears exactly that – handing over money to the government for it to spend badly, badly executed.”

The president-elect questioned, this morning, the concentration of the economic debate around themes such as fiscal stability and affirmed that there are government expenditures that need to be observed as investment.

Since then, the main financial indices, such as the stock market and the dollar, have reacted very badly, after having positive days last week, following the election result.

“The market, when it saw the first names of the transition team, was lenient, because they are not good, but they were stuck in the discourse that the names of the transition agenda will not necessarily be those who will have positions in the government”, said Guarda.

Among the people appointed by Lula to the team responsible for coordinating the transition from the current government to the next are former Finance Minister Dilma Rousseff Nelson Barbosa and the economist linked to the Workers’ Party (PT) Guilherme Melo.

They will work alongside economists who formulated the Real Plan André Lara Resende and Pérsio Arida, also assigned to the team.