Brazil’s economy improves during President Lula’s first year back, but a political divide remains

RIO DE JANEIRO — Brazilian President Luiz Inácio Lula da Silva likes to boast he had a good first year after returning to the job. The economy is improving, Congress passed a long-overdue tax reform bill, rioters who wanted to oust him are now in jail, and his predecessor and foe Jair Bolsonaro is barred from running for office until 2030.

Still, the 78-year-old leader has struggled to boost his support among citizens and lawmakers. Some major setbacks, including a series of votes by Congress to override his vetoes, signaled that Lula’s future could be less productive in a Brazil almost evenly split between his supporters and Bolsonaro’s.

“Brazil’s political polarization is such that it crystallized the opinions of Lula and Bolsonaro voters beyond the economy,” said political consultant Thomas Traumann, the author of a recent best-selling book on Brazil’s political divisions. “These groups are separated by very different world views, the values that form the identity of each group are more important than food prices or interest rates.”

Lula took office on Jan. 1, 2023, after a narrow victory over Bolsonaro in October 2022. At the beginning of his four-year term, only one fourth of Brazil’s Congress sided with him. Business and opposition leaders feared Lula had gone too far to the left.

A riot led by Bolsonaro supporters destroyed government buildings in the capital of Brasilia on Jan. 8 and more turmoil looked certain. Former Finance Minister Paulo Guedes, among other conservatives, forecast Lula’s policies would make Brazil’s economy soon turn as sour as those in crisis-ridden Argentina and Venezuela.

“Six months to become Argentina. One year and a half to become Venezuela,” Guedes said in an interview.

Fast forward to December.

Brazil’s economy is set to grow 3% this year instead of the 0.6% expected by market economists. Inflation looks controlled at about 4.7% on a yearly basis, slightly above projections but far from the double digits of recent years. The unemployment rate fell to 7.5% in November, one percentage point below the day Bolsonaro left office.

The Sao Paulo stock exchange hit record levels in December, rising above 134,000 points for the first time in its history. Brazil’s real currency is also rising against the U.S. dollar. All that brought back the optimistic, keen-to-travel-abroad Lula who had been missing during almost a decade of personal gloom.

“We needed to get our house fixed (in 2023), put things into place,”…