Brazil congress picks new leaders as Lula's challenges mount

Brazil President Luiz Inacio Lula da Silva is already staring down rising food prices, deepening investor skepticism and falling approval ratings. Now he’s getting another challenge: A change in congressional leadership that will test his ability to navigate the country’s conservative legislature.

Brazil’s lower house and Senate chose new leaders Saturday, and both are centrist lawmakers from parties with uneasy relationships with the leftist government. Veteran Senator Davi Alcolumbre won his leadership race by 73 of 81 votes on Saturday. Lula called him just after his victory and praised the new senate leader in a public statement.

“We will walk together in the defense of democracy and in building a more developed and less unequal Brazil, with opportunities for all the Brazilian people,” read the presidential statement.

A few hours later, Congressman Hugo Motta was elected the new lower house speaker by 444 of 513 votes. In congratulating Motta in a public statement, Lula said he was sure that together they will advance in the “construction of an increasingly developed and fairer Brazil, with fiscal, social and environmental responsibility.”

Lacking majorities in either body, Lula’s relations with Congress — and former Speaker Arthur Lira, in particular — have often proved difficult over the last two years. Now he will need to build ties to new leaders on whom he’ll depend heavily as he seeks to soothe market fears about public spending and approve proposals meant to shore up support ahead of the 2026 presidential race.

That won’t be easy. The agenda is already getting crowded, and while Lula’s Workers’ Party threw its weight behind both presumptive favorites, they also enjoy the backing of former President Jair Bolsonaro’s Liberal Party, as it gears up for next year’s election as well. Bolsonaro also called Alcolumbre to praise him and told Bloomberg he would do the same with Motta.

But Lula isn’t waiting to make his own inroads as lawmakers return to work with this year’s budget atop the list of priorities. He will talk to the new chiefs on Monday morning, Institutional Relations Minister Alexandre Padilha said, before kicking off a highly-anticipated overhaul of his cabinet aimed at bolstering support in the legislature.

In Alcolumbre, he will find a familiar face: The 47-year-old lawmaker who helmed the Senate in 2019 and 2020 served as a powerful figure under now former leader Rodrigo Pacheco, and selected at least three members of Lula’s cabinet. He also spearheaded negotiations with the administration over so-called parliamentary budget amendments — money to fund projects of lawmakers’ choosing that served as a regular source of tension.

Lula’s team expects negotiations with Alcolumbre to prove more difficult than they were under Pacheco, who largely served as an ally, two people familiar with the situation said, requesting anonymity to discuss sensitive matters.

Motta, 35, is more of a blank canvas. He has been in office since 2011, rose to prominence by leading a congressional corruption probe into state-run oil firm Petrobras and once enjoyed close ties with Eduardo Cunha — the former speaker who led the impeachment of President Dilma Rousseff, Lula’s successor and partymate.

Initially hesitant to back the young lawmaker’s leadership bid, Lula was convinced by allies and initial conversations with Motta, according to one of the people familiar.

Those talks will likely help keep channels open with Motta, said Paulo Gama, the political analysis coordinator at XP Inc. He added that the lawmaker has served as the lower house’s rapporteur on economic bills and “demonstrated an ability” for both dialogue and technical issues.

The familiarity with Alcolumbre, meanwhile, will likely lead to “continuity of the current model of negotiations” between the Senate and the government, Gama said. “He is someone who is willing to listen to the government’s arguments, but without automatic alignment to all of its agenda items.”

Budget and Fiscal Bills

First on that agenda is the 2025 budget, which the government is eager to pass because spending is limited until it wins final approval. That isn’t expected until March, according to Senator Angelo Coronel, the project’s rapporteur.

Lula is also pushing to secure approval of new income tax exemptions for salaries of up to 5,000 reais, a proposal his party sees as key to regaining support among working class voters. But the cost of that plan, which sparked investor anxiety about Lula’s commitment to fiscal discipline late last year, also needs to be offset.

The government’s initial idea is to do so by increasing taxes on the super rich, but that may not win broad support. The Bolsonaro-led opposition is broadly against the idea, although the former president has instructed them to avoid blasting the plan now for fear they’ll be labeled defenders of the wealthy, he said in an interview.

Davi Alcolumbre avoided commenting on the proposal but said in an interview with Globo News TV after being sworn in that he has “excellent relationship” with Finance Minister Fernando Haddad. “I have already put myself to walk side by side with minister Haddad,” he said.

Battles over the regulation of big tech firms and artificial intelligence also loom this year. And there is the potential for additional measures to shore up public accounts amid ongoing market worries about Brazil’s deficits and debt trajectory.

Those won’t come until later, if at all. In a recent interview, Planning Minister Simone Tebet said the government will wait for the release of March’s bimonthly fiscal report “to see if further measures are necessary.”

Motta addressed that issue in his victory speech saying that “nothing worse for the poorest than inflation, lack of stability in the economy.”

“Stability is the result of a known and consensual set of fiscal responsibility measures,” he said. “Defending economic stability is, yes, defending social stability.”