Exclusive-Brazil’s Lula weighs VP Alckmin as next finance minister to woo centrist voters

Brazilian President Luiz Inacio Lula da Silva is contemplating promoting Vice President Geraldo Alckmin to the position of finance minister if he secures re-election, according to unnamed sources. This move aims to boost Lula's fiscal credibility and appeal to centrist voters following Senator Flavio Bolsonaro's strong showing in the first round of the presidential election.

Under this proposal, Alckmin would retain his role as vice president while assuming the finance minister position, thereby solidifying his control over economic policy. The proposal is still under consideration, and the Brazilian presidency has not commented on the matter. Alckmin, a centrist figure, previously ran against Lula in the 2006 presidential election and served as governor of Sao Paulo for two terms.

He also managed Lula's Development, Industry and Trade Ministry until recently, making him a crucial intermediary with the United States, given the imposition of tariffs on Brazilian goods by Washington. Alckmin is regarded as a stabilizing force in Lula's administration, with strong connections to the business community. However, some critics argue that his influence has waned in recent years due to policies perceived as leaning towards the left.

Lula also contemplated appointing Alckmin as finance minister in 2022 but opted for Fernando Haddad, a fellow Workers' Party member, instead. With a fourth non-consecutive term in mind, Lula finished second in the initial round of voting, trailing behind Senator Bolsonaro - the eldest son of former President Jair Bolsonaro and an ally of former US President Donald Trump.

The unexpected outcome, coupled with the electoral triumph of Bolsonaro's right-wing allies in Congress, triggered a significant market rally on Monday. Investors anticipate that a Bolsonaro administration, backed by a legislative majority, would prioritize fiscal consolidation and legislative passage more effectively. Since assuming office, Lula has witnessed Brazil's public debt surge by over 10 percentage points of GDP to 82.9%, a significant weakness for his leftist government.

Despite relatively low inflation, robust economic growth, record-low unemployment, and rising real wages, Lula's government faces challenges in addressing Brazil's fiscal situation. In his address following the first-round results, Lula emphasized Alckmin's significance to his runoff strategy, stating that no one in Brazil has the moral authority to critique him or Alckmin regarding fiscal policy or fiscal responsibility, considering Alckmin's past accomplishments in Sao Paulo state and their collective achievements in Brazil.

By selecting Alckmin, Lula hopes to attract voters concerned about fiscal credibility who may be dissatisfied with Lula's increasingly populist administration and inclined to support the opposition candidate.