Brazil’s Speaker vows to stop Lula going ‘backward’ on reform

Brazil’s powerful house Speaker has vowed to stop Luiz Inácio Lula da Silva taking any “backward steps” on economic reform, in a challenge to the president’s push to overhaul business-friendly laws.

Lula, the veteran leftist leader who began his third term this year, has stirred unease among investors after seeking to roll back legislation on labour rights and the privatisation of water and sewerage services.

But Arthur Lira, a conservative federal deputy whose position as Speaker of the lower house makes him one of the most influential figures in Brasília, insisted that lawmakers would defend measures designed to give more dynamism to Latin America’s largest economy.

“The chamber [of deputies] is one of conservative, reformist and liberal congressmen,” he said at an FT Live conference in New York. “Without a shadow of a doubt, they will look after the legacy of reforms which were carried out and others which will be put forward this semester.”

“I have expressed what the majority of the chamber thinks, which is not to vote for backwards steps on reforms.”

The remarks are a shot across the bow of the Lula administration, which does not command a majority in congress and must rely on the Lira-led centre-right bloc in order to pass bills.

Lula’s expansive vision for the state has unnerved big business, which fears a rerun of past interventions by leftwing governments. Brazil’s last Workers’ party-led administration ended in the impeachment of Lula’s chosen successor, former president Dilma Rousseff, and the country’s worst recession ever.

Lula, the 77-year-old former trade unionist who previously ruled the South American nation between 2003 and 2010, has attacked its central bank over high interest rates and called the institution’s independence into question. Ministers also want to tweak a 2017 law that loosened Brazil’s rigid employment protection rules.

Oliver Stuenkel, a professor at the Getúlio Vargas Foundation in São Paulo, said Lira was casting himself as the guardian of economic reform.  

“He can stop things that the president wants to do. In a way that’s what a lot of investors want to hear. He’s saying the worst-case scenario is the status quo. He was also telling the government — ‘there’s no point trying radical stuff’.” 

The Speaker of Brazil’s lower house wields considerable political power because the post controls the legislative timetable and has the authority to decide whether to proceed with impeachment requests against the head of state.

Lula suffered his first big legislative defeat this month when the lower house partially vetoed decrees aimed at protecting state-owned water utilities. The orders would have altered regulation approved under the previous rightwing president, Jair Bolsonaro, that opened the sector to more private enterprise.

A crucial test of Lula’s ability to pass legislation will come when lawmakers vote in the coming weeks on a set of rules designed to ease limits on state spending. Passage is critical for the leftwinger to fulfil campaign pledges of extra cash for social welfare and infrastructure.

Lira said the so-called new fiscal framework presented by ministers had a “reasonable backbone”, but would need to be revised to clarify the consequences when targets for the public finances are missed.

Lira insisted that despite differences with Lula, his relationship was “calm, stable and harmonious”, adding they would not go down “the path of confrontation”.

However, the 53-year-old congressman said an overhaul of Brazil’s administrative state — regarded by economists as vital for cutting ineffective public expenditure — was unlikely in the near future.

“For now, it will stay put. You cannot get into 10 fights at the same time.”