Midway through 2002, with Brazilian union leader and leftist figurehead Luiz Inácio Lula da Silva leading the presidential polls, a group of Goldman Sachs analysts created what they called the “Lulameter” — a mathematical model to “quantify the probability of a Lula victory that [was] being priced by currency markets.” Well, the groundhog has emerged from its hole and seen his shadow, and it’s 2002 all over again.
Local financial analysts have not given Lula the benefit of the doubt in his return to the Brazilian presidency. Whenever Lula has spoken out against fiscal austerity and the Central Bank’s management of monetary policy, the markets have gone haywire. A new Quaest survey of 82 executives of Brazil’s investment funds quantifies the financial markets’ distrust of the new government.
A whopping 98 percent of respondents said the country’s economic policies are on the wrong track, and 90 percent say the government’s fiscal policies will fail to make public debt more sustainable.
The dislike is mutual. Since winning last year’s presidential election by the narrowest margin in Brazil’s democratic history, Lula has characterized concerns about public debt and rising public spending as a lack of basic morality and regard for the country’s social crises.
“It is not possible that there was a cut to [a medicine subsidy program] in the name of fiscal goals, of...
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