Proposals by Guedes' team that target workers bring down Bolsonaro's campaign in the final stretch.

BRASILIA (Reuters) - A key campaigner for President Jair Bolsonaro (PL) before the first round of elections, Economy Minister Paulo Guedes has adopted a defensive stance in recent days after becoming a central target of criticism from opponents of the Bolsonaro campaign in the final stretch of the electoral process.

The spread of news about potentially unpopular measures emerging from the Ministry of Economy, with the leak of studies conducted internally within the ministry, has also raised alarm among the president's allies.

A key figure in Bolsonaro's 2018 campaign, when he was given the title of "Ipiranga gas station" and a supposed carte blanche to lead the country's economic policy, Guedes has already received signals from the president that he could remain in the position in a possible second term.

In recent months, even without actively participating in the core of the campaign, the minister had been attending a series of events to highlight the improvement in economic indicators, such as the reduction in unemployment, the growth of economic activity, and the decline in inflation.

The stance has changed in recent days, with Guedes using the events to defend himself, repeatedly denying the adoption of unpopular measures and launching accusations against the campaign of former president Luiz Inácio Lula da Silva (PT) and his supporters.

To mitigate the negative effects of recent news, Bolsonaro's campaign released seven videos on Thursday featuring Guedes, in which he highlights economic data, promises to keep the Auxílio Brasil program boosted, and answers questions about the alleged measures under study, stating that they are lies.

According to a source from Bolsonaro's campaign, the offensive involving the recording of the videos was planned because the information circulating around Guedes in recent days has damaged the president's image. According to the source, the minister has now "joined the right side of the campaign."

The team's assessment, according to this member, who requested anonymity, is that the economy will be one of the main topics of the decisive debate on TV Globo this Friday night between Bolsonaro and Lula, and could help in the attempt to turn the tide for the reelection candidate.

Last week, a report in Folha de S.Paulo stated that Guedes was considering de-indexing the budget, which would exempt the government from adjusting the minimum wage and social security benefits for inflation.

Earlier this week, a report in the newspaper O Estado de S. Paulo indicated that Guedes' team had written advocating for the elimination of deductions for health and education expenses from income tax, which would have a greater impact on the middle class.

The third episode that became ammunition for opponents was the dissemination on social media of a statement made by Guedes in 2020 in which he suggested that the government could tax transactions made through Pix.

The minister has denied all three claims and even went so far as to say that members of the Workers' Party within the ministry were producing studies and leaking them to the press as if they were proposals authored by the government.

“I’m having to react publicly to the lies. They lie all the time,” he said this Thursday in São Paulo. “Fake news, people who robbed Brazil, now wanting to steal the future and the hope of elderly people who are peacefully at home, this is vote theft.”

Guedes, who has openly advocated for constitutional changes to de-index the budget, has argued that the measure would allow for adjustments above inflation. However, it is not necessary to amend the Constitution for the government to grant these real increases.

The minister and his team also internally advocated, throughout the government, the reintroduction of a tax on financial transactions to replace labor charges – a measure that was blocked by resistance from the Presidential Palace. The elimination of income tax deductions was also studied by Guedes' team, but ultimately discarded.

On Thursday, the minister personally denied to Reuters Fact Check Brazil, Reuters' fact-checking division, the rumor that the government intends to tax transactions made via Pix.

Sought for comment specifically on Guedes' change of stance, the Ministry of Economy did not immediately respond.

ELECTORAL ATTACKS

In recent speeches, Guedes has also intensified his direct attacks on Lula and his allies. On Wednesday, for example, he criticized the spending cap rule and the person responsible for its implementation, former Finance Minister Henrique Meirelles, stating that he "isn't even an economist" and "will break" the fiscal rule in the event of Lula's election.

Another target of the minister are well-known economists who have declared their support for the Workers' Party candidate, claiming that they make grossly inaccurate projections and that they are in favor of Lula because they have no opportunities in the private sector and are seeking a position in a Workers' Party government.

On Thursday, Guedes again tried to link the PT (Workers' Party) to supposedly unpopular plans drawn up by those he defined as "Lula's economists." However, the minister was referring to suggestions from independent economists in the document "Contributions to a Democratic and Progressive Government," which has no connection to Lula or the PT.

Guedes stated that the same "economists of Lula" were planning to levy taxes on informal workers, "seize" the FGTS (Brazilian severance pay fund) to pay unemployment insurance, and end the Auxílio Brasil (Brazil Aid) program, replacing it with an idea that was not clear.

These measures are not discussed in the PT's program, but in the document by economists Bernard Appy, Carlos Ari Sundfeld, Francisco Gaetani, Marcelo Medeiros, Pérsio Arida, and Sérgio Fausto.

"The document we produced has nothing to do with Lula's campaign. It's a personal initiative of a group of technicians, without any party affiliation. Neither Lula's campaign nor the PT – or any other party – had any influence on its creation," Bernard Appy told Reuters.

On Wednesday, while arguing that social programs should transfer resources directly to the population, the minister also made an indirect criticism of Lula, saying that "if you give money to 1.000 Brazilian children, 999 will do the right thing, one will have a drink, and sometimes even become president."

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