Brazil Finance Chief Pivots as Lula Lingers in the Limelight

Fernando Haddad Photo by Arthur Menescal /Photographer: Arthur Menescal/Bl

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(Bloomberg) — Not long ago, Brazil’s finance chief was a rising star in the government of President Luiz Inacio Lula da Silva. Now, factors beyond Fernando Haddad’s control have put his political ambitions on hold.

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Haddad appeared well-positioned to take the baton from Lula in next year’s presidential election, after steering Latin America’s largest economy toward better-than-expected growth while simultaneously reining in his boss’s big-spending instincts. 

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But Lula has since made it clear he will run for reelection, pressing his luck in a bid for an unprecedented fourth term and, in doing so, depriving Haddad of another shot at the top job for now. What’s worse, the president has also blocked additional budget reforms that could have helped ease market concerns about Brazil’s deteriorating finances, according to people familiar with the matter. Instead, he’s ramped up government spending to the limit of fiscal guardrails Haddad himself championed early in the administration.

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With less than 17 months to go before the election, Lula is trying to juice an economy that has delivered mixed results since he took office in 2023. While gross domestic product expanded more than 3% annually and unemployment hovers at a 13-year low, consumer prices and public debt are creeping up. Investors are increasingly worried that the government may breach the Haddad-backed fiscal rule if Lula’s popularity still lags ahead of the 2026 vote.

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Left with the unenviable task of defending balanced public finances from sniping within the ruling coalition, Haddad has adapted his strategy, the people said, requesting anonymity to discuss private matters. He now focuses on an agenda described by his allies as more constructive, promoting tax incentives for tech companies willing to build data centers in Brazil. 

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Responding to a request for comment, a spokesperson for Haddad said the minister will continue to deliver measures that ensure spending doesn’t breach the fiscal rules while also supporting an agenda of key microeconomic reforms. The spokesperson declined to comment on Haddad’s electoral ambitions.

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As Lula visited Beijing for a state visit with his Chinese counterpart Xi Jinping earlier this month, Haddad traveled to California to charm tech titans from companies including Nvidia Corp, Alphabet Inc and Amazon.com Inc. He also met with Scott Bessent, US President Donald Trump’s treasury secretary, during the trip. 

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Critics argue that the data center agenda falls outside the finance chief’s core responsibilities and come as Haddad is hard pressed to pursue fresh economic reforms that could cement a more lasting legacy.

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But an official close to the finance minister defended his strategy, noting that the data center initiative is part of a broader energy transition plan aligned with Haddad’s long-term vision for the country. It also aims to build on the success of a tax reform approved under his watch, the official said. The decision to meet Trump’s top economic official and US tech executives while Lula was in China was further meant to signal Brazil’s commitment to multilateralism, engaging key players from both the US and the Asian giant, the official added.