Brazil markets sink as traders mull Lula’s plan to beef up state

Bloomberg

Brazilian assets tumbled on the first session of 2023 as traders digested plans by President Luiz Inacio Lula da Silva to use state-owned companies to drive economic growth.
Petrobras slumped as much as 6.9% in Sao Paulo, the main drag on the benchmark Ibovespa index, which fell 3.1% as of 11:47 am. Lender Banco do Brasil SA dropped as much as 4.8%. Swap rates jumped across the curve and the real led losses among major currencies, down 1.2% with holidays in the US and UK thinning out liquidity in global markets.
At his swearing-in, Lula reinforced his commitment to fighting inequality and hunger, bashed the current fiscal rules as “stupidity” and said public banks and companies including oil giant Petroleo Brasileiro SA will have “a key role” in the new economic cycle.
In his first hours back on the job, Lula signed a provisional measure that guarantees 600 reais ($112.17) a month for the Bolsa Familia aid program, removed companies such as Petrobras from privatisation plans, revoked a decree that reduced levies for large companies and extended a tax break on fuels.
While Lula has criticised the current fiscal rule for months, the comments are sparking fresh concerns among traders, who worry the left-wing administration will erode fiscal accounts and fuel inflation.