Brazil government unity and support may face limits

Significance

President Luiz Inacio Lula da Silva’s cabinet-level economic team includes three potential presidential successors, representing parties from the centre-left, centre and centre-right. While they have been making an effort to demonstrate teamwork and cohesion, there is a risk that divisions will grow over time.

Impacts

• The recently announced measures should soothe market concerns over the government’s commitment to fiscal responsibility.
• Further reforms will be needed to reignite economic growth and job creation; low growth risks undermining the government’s support.
• Managing a large and heterogenous coalition could become harder for Lula if his government loses popularity.