Brazil could reach August without a response from the US, says Haddad.

Elaine Patricia Cruz – Reporter for Agência Brasil

Brazil will not leave the negotiating table with the United States, Finance Minister Fernando Haddad admitted today (21).

In an interview with CBN Radio, the minister stated that the Brazilian government will not leave the negotiating table, but does not rule out the possibility that tariffs on Brazilian products could indeed begin on August 1st.

Despite this, the government has been working on contingency plans to help the sectors most affected by Donald Trump's plan to establish a 50% tariff on all Brazilian products exported to the United States.

"Brazil will not leave the negotiating table. President Lula's determination is that we have not given any reason to suffer this type of sanction, and his guidance is as follows: Vice President [Geraldo] Alckmin, the Ministry of Finance, and the Foreign Ministry are permanently engaged [in the negotiations]. We sent a second letter [to the United States government] last week, in addition to the one in May, to which we have not received a response so far, but we will insist on trade negotiations so that we can find a way to bring the two countries closer together, as they have no reason to be at odds," the minister emphasized.

According to him, a working group is working to help the Brazilian sectors most affected by the possible increase in the US import tax, but these possibilities have not yet been presented to President Luiz Inácio Lula da Silva.

Possible scenarios

“At President Lula’s request, we are outlining possible scenarios, both regarding the opening of negotiations by the United States, which hasn’t happened yet, and a possible response to the two letters we sent. Could we reach the first [of August] without a response? That’s a scenario we can’t rule out at this moment. But it’s not the only scenario we’re considering,” he stated. “So we have a contingency plan for any decision that the President of the Republic may make,” he added.

Haddad said the Lula administration will not "pay back in kind" regarding sanctions against Americans or American companies. But the government is considering applying the law of reciprocity.

"We have a working group preparing to present [proposals] to the president this week. What are our alternatives? Both regarding the reciprocity law and any support the president might consider for the most affected sectors. But this hasn't yet been presented to President Lula," said the Finance Minister.

For Haddad, this contingency plan won't necessarily imply new public spending. He noted, for example, that in aiding flood victims in Rio Grande do Sul, the federal government adopted other instruments besides increased spending, such as credit lines.

"This won't necessarily imply primary spending. In the case of Rio Grande do Sul, which is a different matter and was affected by an extreme climate event, the smallest portion of the investment to recover the state's economy was primary spending. The majority went to support companies affected by last year's floods," he emphasized.

Bolsonaro

According to the minister, several countries have been affected by the tariff hike imposed by the United States. But in Brazil, Haddad said, there is a particularity: the individual relationship between the Bolsonaro family and US President Donald Trump.

"Now is the time for unity in the country in defense of the national interest and the realization that we are not alone in this issue with the United States. But we have a particularity: there is a far-right political force in Brazil that is competing against national interests," said Haddad.

According to the minister, Brazil has a deficit compared to the United States and is "far from being the United States' problem," which would not justify such a high tariff. Furthermore, Haddad stated that he had met with the U.S. government at least 10 times this year alone and that he had been told that the initial 10% tariff could even be reduced.

"I met with the Treasury Secretary in California two months ago, discussing a 10% tariff as unfair, and he was open to dialogue. What changed in the last two months for a U.S. official to be open to discussing a 10% tariff reduction, and then, halfway through, you wake up to the news that it went from 10% to 50%?" the minister asked.

"What's really left to maintain this 50% tariff? The individual issue of Trump's relationship with former President Bolsonaro. From my perspective, what happened is very serious: to make the fate of a person who effectively tried to stay in power by force and orchestrated national forces for his own benefit," he added.

During the interview, the Finance Minister also expressed surprise at Trump's reported investigation into the instant payment method Pix. Haddad compared Pix to a cell phone, which is designed to replace landlines.

"Pix is ​​a successful model for zero-cost financial transactions," the minister stated, reinforcing that it could be copied by several other countries. "How can Pix represent a threat to an empire?" the minister questioned.

Fiscal target

During the interview, he denied that the government will revise its fiscal target. "Although the market always says we'll revise it, we never do," he asserted.

And he reinforced that, by the end of President Lula's term, the government will deliver “the best fiscal result in the last 12 years.”

"We will deliver the best fiscal result in four years, easily, recovering our finances. We will deliver the best employment level. We will deliver the best income distribution. We will deliver the best average growth since 2015. Mark my words. The obsession of the Ministry of Finance, the economic sector, and [Planning] Minister Simone Tebet is to deliver the best result since 2015. And we will deliver," he concluded.