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Brazil unveils $76bn public spending spree

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Brazilian president Luiz Inácio Lula da Silva has unveiled a major public works programme with federal funds of R$371bn ($76bn) over four years, as the leftwinger looks to spur growth with extra state spending.

The leader of Latin America’s largest economy on Friday presented long-awaited plans to pour money into construction, infrastructure projects and the ecological transition.

Together with additional investments from the private sector and state-controlled enterprises, the Lula administration forecast the total value will reach R$1.4 trillion ($287bn) by the end of his four-year mandate in 2026. 

Target areas include energy, transport, water and sewerage, healthcare, education and internet access.

“Today my government begins. So far what we have done is to repair what has gone wrong,” said Lula, who assumed office in January after defeating rightwing incumbent Jair Bolsonaro at the ballot box. “The state will once again be an entrepreneurial state”.

Officially known as the Growth Acceleration Programme, the blueprint reprises a trademark policy from the last time Lula’s Workers’ party was in power. 

It draws inspiration from the massive stimulus package by US president Joe Biden promoting renewable power and re-industrialisation. 

Lula, a veteran politician who ruled between 2003 and 2010, pledged in last year’s election campaign to expand the role of the public sector to reduce poverty. 

However, critics pointed out that two previous large-scale investment initiatives launched under Lula’s party were plagued by waste and corruption. 

“The execution of projects was often flawed. Many fell by the wayside, and were characterised by considerable delays and cost overruns,” said Claudio Frischtak, a former World Bank economist and founder of consultancy Inter. B. 

Public expenditure further increased under Lula’s chosen successor, Dilma Rousseff, leading to a fiscal crisis that was blamed for pushing the country into a deep recession. 

The government said the new scheme would have strong involvement from private sector actors — which it predicts will provide R$612bn — with infrastructure concessions and public-private partnerships. State-owned enterprises including oil producer Petrobras are expected to invest R$343bn.

To release the taxpayer funding, the administration in Brasília must first pass a bill that loosens a constitutional limit on growth in spending, as well as a new budget law.

“Given the nature of the projects has the potential to make everyone happy by generating jobs and giving legislators concrete things to deliver in their constituencies, I don’t see Congress opposing the overall initiative,” said Mário Braga at consultancy Control Risks.

Lula is expected soon to carry out cabinet reshuffle which should win him stronger parliamentary support through the inclusion of two-centre right parties in the executive.

Additional reporting by Beatriz Langella

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