{"text":[[{"start":5.9,"text":"Luiz Inácio Lula da Silva’s supporters partied late into Sunday night on Avenida Paulista in São Paulo after a stunning comeback in Brazil’s presidential election run-off secured the veteran leftwing leader a fourth non-consecutive term, just two days before his 81st birthday."}],[{"start":23.48,"text":"But the country’s financial markets began the working week in an extremely ill temper. At one stage on Monday the stock market was down 17 per cent, prompting a temporary halt in trading, while the real tumbled by around 10 per cent against the dollar. It was a harsh wake-up call about the economic realities Lula now faces."}],[{"start":43,"text":"Even before the election campaign, Brazil’s public finances were starting to look shaky. Over the course of Lula’s third term beginning in January 2023, public debt has risen more than 10 percentage points to over 82 per cent of GDP as the government sought to drive faster growth through higher public spending. The budget deficit is expected to be 8 per cent of GDP this year. Real interest rates are elevated, pushing up debt-servicing costs and swelling the deficit. In the view of many investors, the current debt dynamics are unsustainable."}],[{"start":75.68,"text":"Bond investors have also been unnerved by an election campaign which saw Lula and his hard-right challenger Flavio Bolsonaro fall over themselves to offer handouts to voters — from free public transport at the weekend from Lula to a debt holiday for consumers from Bolsonaro."}],[{"start":90.98,"text":"The market reaction is a warning for Lula of what could be in store. He needs to rein in public spending or his hand could be forced by investors increasingly reluctant to fund his government. Lula should start by changing his rhetoric. During the campaign he said that it was “babaquice” or foolishness to talk about fiscal tightening. He will not want to abandon all his campaign pledges without facing claims of betrayal, but he needs to articulate that he understands the precariousness of the fiscal situation."}],[{"start":118.72,"text":"With the finance ministry currently run by an interim appointment, Lula will have to nominate a new minister who has credibility with business and markets. This does not necessarily mean the appointment of a prominent banker but it does mean the finance ministry is not the place to test out one of the rising stars within Lula’s Workers’ Party who are being groomed as potential successors."}],[{"start":139.24,"text":"Lula should also build as broad a coalition as possible within Congress to ensure he can govern effectively. Rightwing parties swept the congressional elections three weeks ago and the large group of Bolsonaro loyalists will be desperate to exact political revenge after Sunday’s humiliating result. The electoral process itself was marred by controversy after a Supreme Court justice — who was formerly Lula’s personal lawyer — ordered a two-hour extension of voting, following complaints with public transport."}],[{"start":169.2,"text":"When Lula defeated Jair Bolsonaro four years ago, he constructed a coalition that stretched from left to centre-right in order to take on the hard right — only to cold-shoulder some of his new allies once in office. He will now have to recreate that more ecumenical spirit."}],[{"start":184.84,"text":"If Lula can forge a credible plan to stabilise the debt-to-GDP ratio, he could create the conditions for interest rates to fall, which would give him some wriggle room in the budget during the rest of his mandate. If he fails to take action now, he risks spending his fourth term buffeted between financial markets that have little confidence in him and a Congress that is downright hostile. That would be a dispiriting outcome after a remarkable victory."}],[{"start":211.68,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1793067166_2813.mp3"}