Brazil's economy is growing. So why isn't Lula polling better?

So Luciano, Brazilians vote on Sunday.

President Lula is asking for a fourth term on the strength of his economic record.

And on paper, it's a good one.

His campaign never tires of repeating that growth averaged 3% a year in his first three years against 1.2% under Jair Bolsonaro.

And that unemployment fell from 7.6% at the end of 2022 to around 5.3%.

The figures were just out today, September 29th.

But Numbers alone don't tell the story.

And even these numbers don't tell the full story.

We still have, and we have had for years, double digits, interest rates, gross public debt has reached more than 82% of GDP in July.

And household defaults are... rising uh the central bank now sees a 90 chance that inflation will break the ceiling of the target band at uh 4.5 percent this year so which story is the the real one uh if i can ask for a quick word like how do you rate this three and a half years of the economy under lula

If I was to give a rate, I would give it probably a B- or something like that.

Everything you said is true.

Brazil, if you look at the inflation and GDP numbers, you may ask yourself why people are not re-electing this government outright, because inflation is It will be high this year mostly because of the oil shock, but if you take the four years in aggregate of the Lula's third term, it will be the lowest inflation in a four-year average since the real plan.

GDP is growing and So people should be happy.

So what's going on here? And there are some explanations that by themselves, they don't have much traction.

But if you take them all together, maybe they explain why we're here.

The first one you also mentioned is that the price for this economic policy mix has been a very high real interest rate.

So Brazilians are paying 10% real interest rates in the interbank market, which means that for the average Brazilian, the cost of credit is way higher, especially considering that credit spreads in Brazil are among the highest in the world.

So, since the government chose from day one to run an expensive fiscal policy, the way that the central bank decided to act to not allow inflation to run harder was to simply put the interest rates in a very high level.

And the collateral effect of that is that credit is very expensive.

What also happened is that this government believed that it was a good thing to incentivize people to leverage, to take more credit, even at those higher rates.

surprise, surprise, now that's eating up their consumption potential or purchasing power.

So it's correct that unemployment is at a low.

It's correct that real wages are running at a very healthy pace.

But it's also correct that the debt burden is the highest that we've seen in decades.