Lula, Congress swap places in fiscal responsibility debate

Moody’s is the latest rating agency to improve its assessment of Brazil, bumping up the country’s outlook from stable to positive. That said, Moody’s flagged the country’s “still relatively weak fiscal strength, given Brazil’s high debt burden and weak debt affordability, which remains sensitive to economic or financial shocks.”

The Luiz Inácio Lula da Silva administration has admitted that meeting the fiscal goals it set for itself last year may be too tall an order. The Finance Ministry asked for more 2025 spending leeway, and demands for an extended leash this year are within the realm of possibility.

Not many months ago, Senate President Rodrigo Pacheco was among the Lula administration’s critics, saying the government was going against “the economic orientation and directives of Finance Minister [Fernando Haddad], who is entrusted with the important mission of establishing Brazil’s economic policy.” Lula’s spending appetite, Mr. Pacheco suggested, could put the country “on a dangerous path.”

Lula has said time and again that he is not breaking a sweat over whether Brazil will meet its primary fiscal goals. Instead, he depicts austerity proponents as oblivious to the country’s massive levels of inequality and poverty. He was elected with the promise of jacking up social spending and investment in the country, policies that his detractors dismiss as populist.

But Mr. Pacheco’s defense of austerity seems to be a thing of the past. As disputes over the next elections for leadership in congressional chambers near, Mr. Pacheco has become increasingly open to spendthrift measures.

Senate changed its mind

In mid-April, the Senate Constitution and Justice Committee approved a bill to amend the Constitution to significantly increase the wage bill of elite public servants. Roughly speaking, it grants workers in the judiciary branch a 5 percent salary bump every...