MercoPress. South Atlantic News Agency

Brazil: US dollar goes up on Lula's first working day

Lula spent his first day on the job undoing most of Bolsonaro's controversial decisions

Brazilian markets plummeted Monday during President Luiz Inácio Lula Da Silva's first working day in office following his inauguration speech and his first measures as head of state.

The US dollar went up 1.5% at the end of the day against the Brazilian real to stand at R$ 5.3580 after reaching R$ 5.3633. Meanwhile, the São Paulo stock exchange showed the Bovespa index fall by 3.3%.

Brazil's state-run oil company, Petrobras, dropped over 6% after Lula signed a decree on Sunday extending for 60 days the exemption from federal fuel taxes, a measure already approved under Jair Bolsonaro to curb prices at pumps.

Finance Minister Fernando Haddad said Lula would not accept the budgetary R$ 220 billion fiscal deficit. “In addition to working with full emphasis on the recovery of public accounts, it is necessary to combat inflation,” Haddad said while announcing he would be sending to Congress a bill to guarantee the sustainability of the public debt in the first semester of 2023.

Also on Monday, Lula ordered his cabinet to halt the privatization of several state-owned companies, such as Petrobras, Pré-Sal Petróleo SA, and Correios.

Investors were also displeased with Lula's appointment of Senator Jean-Paul Prates to head Petrobras, which heralded that the company's pricing policy should change in the coming months.

Consultants were still skeptical as to what the new fiscal guidelines replacing spending caps would be.

Also on his first working day, Lula repealed measures dictated by Bolsonaro regarding access to weapons and reestablished measures to combat deforestation in the Amazon.

Lula suspended for the next 60 days the granting of new licenses for civilian hunters, shooters, and collectors (CACs), which grew exponentially under the previous administration, in addition to introducing tighter limits to the purchase of ammunition and temporarily suspending the registration of new firing ranges. Lula also created a working group to draft new regulations for the Statute of Disarmament, a law promoted during his first administration (2003-2006) to disarm the civilian population.

The new measure “seeks to close the irresponsible period of 'anything goes', incompatible with the Constitution,” Security Minister Flávio Dino said on Twitter.

The Workers' Party (PT) leader also created a “permanent inter-ministerial commission for the prevention and control of deforestation” and took other measures to protect the Amazon, whose average annual destruction grew 75% under Bolsonaro while reinstating the so-called Amazon Fund created in 2008 to collect donations for forest preservation. The Amazon Fund had been frozen since 2019 due to differences between major donors Norway and Germany with the Bolsonaro administration. Lula also revoked a decree allowing mining in indigenous and environmentally protected areas.

The new president also signed a resolution to maintain the Bolsa Familia social assistance program at 600 reais -about US$113-, a promise obtained after a laborious negotiation with Congress in December to guarantee exceptional resources.

Lula also reversed a decision by the Bolsonaro administration regarding public administration confidentiality, which he dubbed as a “setback on the policy of public transparency.”