“I was contacted by the Chief of Staff’s office and made myself available,” Mantega said in an interview when asked about the petrochemical producer. “If the shareholders’ meeting decides this, then I will go to the Braskem board.”

The government is turning to Mantega, one of Lula’s closest allies and economic advisers, as it maneuvers for greater influence in key companies. Last month, Lula fired the CEO of Petrobras due to a dispute over the dividends it paid instead of using the money for investments. The leftist leader is under pressure to raise spending, juice economic growth and halt a decline in approval ratings.

Lula tried to appoint Mantega as CEO and chairman of mining company Vale SA earlier this year in a move that prompted push-back from both its top brass and investors. A 75-year-old member of the Workers’ Party, he was Brazil’s longest-serving finance minister under Lula and his successor Dilma Rousseff. 

In that role, Mantega backed counter-cyclical fiscal measures to shore up Brazil’s economy after the 2007-2008 global financial crisis, though those policies led to a deterioration in public accounts. On his watch, the government also intervened in the power sector to force down electricity prices. 

The office of the Chief of Staff didn’t immediately respond to a request for comment. Braskem declined to comment.

‘Irrational’ Policy

Mantega said Brazil’s main economic problem now is “irrational” monetary policy championed by central bank Governor Roberto Campos Neto. The country needs more investment to grow, and higher-than-necessary interest rates are driving up borrowing costs for companies, he said.

On top of that, Brazil’s inflation is under control, Mantega said, meaning there was no reason for policymakers to slow the pace of monetary easing.

Last month, Campos Neto, who was appointed by right-wing former President Jair Bolsonaro, led the majority of central bank board members that decided to cut benchmark Selic by a quarter-point, to 10.5%. All four directors appointed by Lula, however, favored a larger, half-point cut.

“The Bolsonaro government continues to manage monetary policy,” Mantega said. “This is wrong. I’m not against central bank independence, but it has to be based on the new government. Otherwise you can have a conflict between fiscal policy and monetary policy, which is what is happening now.” 

Fiscal Target

One of the reasons that could explain the rationale behind the central bank’s move, the former minister said, was the government’s decision to target a less ambitious 2025 fiscal result than previously indicated. 

In April, the economic team said it will aim for a balanced primary budget, which excludes interest payments, instead of a surplus next year. Still, in Mantega’s view, that change is not enough to spur inflation. 

“You can’t say that just because the government is going to spend half a percentage point more in 2025, you’re going to have inflation,” he said. “It’s not possible.” 

Mantega agrees with current Finance Minister Fernando Haddad that Brazil’s 3% inflation target is very demanding. He said he expects policymakers will do a more rational job after Lula’s appointees become a majority of the board next year. 

“Controlling inflation has to be an absolute priority, because inflation hurts the economy,” he said. “The new board will certainly follow what is set out by the National Monetary Council, which established inflation targets that will be pursued and that are very low for the situation of the Brazilian economy.”

Mantega also said Lula is more anxious now than in his prior times in power because the balance of political forces has changed. Most notably, Congress had more sway than in the past.

“Sometimes he has to accept decisions he wouldn’t like to, but he does,” Mantega said. “So I think maybe he’s more distressed because of this situation.”

–With assistance from Bruna Lessa and Mariana Durao.

More stories like this are available on bloomberg.com

©2024 Bloomberg L.P.

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Published: 04 Jun 2024, 12:05 AM IST