SAO PAULO (Reuters) -Brazilian President Luiz Inacio Lula da Silva said on Wednesday his government would remain committed to fiscal responsibility, though he also promised to maintain its policy of handing out cash to eligible poorer families.
“Fiscal responsibility is not just a word, it is a commitment for this government… and we will keep it to the letter,” Lula said at an event to launch a subvention program for family agriculture.
“We’ll have an economic policy that will make this country grow, we’ll keep making income transfers, and at the same time will keep the responsibility we’ve always had.”
Brazilian assets suffered a sell-off in recent weeks as markets fear fiscal deterioration amid government reluctance to cut spending, which has raised doubts about whether it can achieve its goal of eliminating the primary deficit this year.
On Wednesday, however, the Brazilian real rose more than 2% against the U.S. dollar in spot trading, as market participants awaited a scheduled meeting between Lula, Finance Minister Fernando Haddad and other government officials to discuss the recent currency moves.
According to traders, any signs that Lula might hold back on comments about what he calls “speculative” foreign exchange moves or on his criticism of the central bank would have a positive impact on the real.
The leftist leader’s ongoing public feud with central bank chief Roberto Campos Neto took its toll on Brazilian markets in the past few days, while also stirring fears that the government might take capital control measures to help the local currency.
Haddad, seen by many as a mediator between Lula, the central bank and market participants, told reporters on Wednesday that fiscal responsibility was “a lifelong commitment” for the president. Haddad added that he thought the real’s slump would “accommodate”.
Asked by reporters what could be done to slow the real’s decline, Haddad said the central bank has the autonomy to intervene on the foreign exchange markets whenever it sees fit.
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