Is Lula returning to full state capitalism? Mixed signals abound

On Friday, Brazil’s oil and gas giant Petrobras is set to discuss (and approve) the name of its new CEO. Magda Chambriard was appointed by President Luiz Inácio Lula da Silva last week, the day after Jean Paul Prates was pushed out of the position — she will be the company’s 12th chief executive in 21 years.

Months earlier, the government had tried to interfere in Vale to influence who would be the next chief executive of the mining company. There is also growing apprehension around a perhaps less orthodox configuration of the Central Bank, following the departure of current chairman Roberto Campos Neto at the end of this year. 

At the same time, the government strives to pursue its zero deficit target for the year and to avoid the dilution of the tax reform as Congress gets into the nuts and bolts of its supplementary regulations.

Amid these contradictory signals, between interventionist pushes and the efforts to secure two structural changes crucial to long-term economic stability, analysts not only expect this degree of intervention to continue, as they have already priced it in.

“This fear of more intervention is already appearing in the pricing of some assets and in the performance of the Brazilian real, which is underperforming when compared to other emerging market currencies,” says Silvio Campos Neto, a senior economist and partner at consultancy firm Tendencias.

For Diego Bonomo, senior Brazil advisor at white-shoe law firm Covington & Burling, the first sign in the more interventionist direction came in late January with the launch of the new industrial policy. Despite having some interesting goals regarding energy transition, semiconductors, and digitalization, the policy also repeated the old state developmentalist formula, “in particular subsidies, government procurement,...