Brazil's Lula Uses State Resources to Court Voters Ahead of Runoff Election

President Luiz Inácio Lula da Silva has deployed a range of popular and expensive government initiatives to enhance his prospects in Brazil's presidential runoff election, following a second-place finish behind rival Flávio Bolsonaro in the initial round. These measures, if enacted and if Lula secures a fourth nonconsecutive term, would represent a significant financial commitment for Brazil.

Lula, 80, is challenging the 45-year-old Bolsonaro, an ally of former U.S. President Donald Trump. A victory for Lula would counter a potential increase in Trump's regional influence and prevent the return of the Bolsonaro family to power.

Among the key promises Lula has made to close the gap with Bolsonaro are legislative changes. Congress approved a bill to reduce the standard workweek from six days to five, and weekly working hours from 44 to 40, without a reduction in pay. Bolsonaro eventually endorsed this measure late in the campaign. Business leaders have expressed concerns that this reduction in hours, without a corresponding rise in productivity, could increase labor costs, negatively impact small businesses, and potentially fuel inflation and informal employment.

In September, Lula announced a 15% increase in payments for Bolsa Família, Brazil's primary welfare program, which adjusts benefits based on family size and the number of children. This increase took effect days before the election and is expected to benefit nearly 50 million people. Critics have labeled these permanent government-funded income transfers as a populist tactic to secure voter loyalty. The government estimates the welfare program increase will cost taxpayers 5.8 billion reais ($1.2 billion) for the remainder of the year.

Lula also signaled support for credit relief and tax incentives for small businesses, which would grant them access to low-interest loans from public banks and allow for the renegotiation of existing debts. The government anticipates this program will cost 3 billion reais ($600 million) over the next three years. Additionally, he has introduced a national debt refinancing program designed to clear default records for millions of low-income Brazilians. Opposition analysts and market commentators view these state-backed debt forgiveness and subsidized renegotiation efforts as short-term relief that does not address underlying issues of financial literacy.

To address fuel costs, Lula's administration issued executive measures including a decree to eliminate federal taxes on gasoline imports and sales for 30 days, with the possibility of extensions. These actions complement existing federal tax relief on gasoline and subsidized diesel costs for importers. The government has also extended tax exemptions and expanded support for ethanol to maintain the competitiveness of biofuels. The estimated cost of these fuel-related measures is 5.2 billion reais ($1 billion).

Furthermore, Lula plans to send a bill to Congress proposing zero-fare public transportation on weekends. The cost of implementing such an initiative is estimated to range from 5 billion to 16 billion reais ($1 billion to $3.2 billion), depending on the specific model adopted.