Third Inauguration Of Lula As Brazil's President

• Law Firm: Herbert Smith Freehills
• Subject Matter: Environment, Energy and Natural Resources, Energy Law, Environmental Law, Oil, Gas & Electricity, Renewables
• Author: Mr Edward Dougherty and Maria Falcao de Andrade
• Published date: 10 February 2023

On January 1, 2023, following an extremely disputed presidential election, Luiz In'cio Lula da Silva took office as the President of the Federative Republic of Brazil. Although a popular Brazilian politician and former President for two consecutive terms (2003 until 2010), Lula's third presidential term begins in a polarized political scenario.

On January 8, 2023, violent protests and riots by supporters of the outgoing President Jair Bolsonaro took place in the capital Brasilia targeting the principal buildings of the Executive, Legislative and Judicial federal branches. These demonstrations reflect the reality of the country's severe political division which the new federal Brazilian administration is set to govern.

In this post, we discuss some key issues arising out of President Lula's governmental plan including proposals made during his presidential campaign in connection with economic development, socio-environmental and climate sustainability initiatives, and recent developments in these same areas since the beginning of his new federal administration.

Political Division

Lula's party, Worker's Party (Partido do Trabalhador), did not achieve a majority in Congress in this latest electoral cycle. Accordingly, we can expect many of Lula's governmental proposals to be subject to delays and challenges by the opposition. The nation's tense and polarized political environment, divisions which have deepened over the past four years with the former Bolsonaro presidential administration, are unlikely to ease soon, and may cause representatives to deviate from the legislative agenda.

Fiscal Policy and Reform

The new administration has announced plans to cut the budget deficit for 2023, focusing on increasing revenues rather than reducing expenditures, which is likely to include investments in governmental social programs. Such measures aimed at increasing revenues, among others, include the facilitation and refinancing of certain tax payments for taxpayers and simplifying administrative tax dispute proceedings to extinguish the possibility of an ex officio administrative appeal on disputes involving certain threshold amounts¹ in certain circumstances (Litígio Zero program).

On January 17, 2023, during the World Economic Forum, the Brazilian Minister of Finance announced that the new fiscal policy framework proposal should be submitted to Congress by April 2023. During the first half of 2023, the federal government also intends to cause a fiscal reform to be...