(Bloomberg) -- Brazil’s Luiz Inacio Lula da Silva tapped the head of his Workers’ Party to a key cabinet role in a sign his government is taking a sharp turn to the left as he tries to turn around plummeting approval ratings.
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Lula named congresswoman Gleisi Hoffmann as his new Minister of Institutional Relations on Friday, putting a fierce critic of fiscal austerity and high interest rates into a key advisory role that also serves as the government’s chief legislative negotiator. She will replace Alexandre Padilha, who is slated to take over the Health Ministry as part of a broader cabinet overhaul.
The move rattled already-skittish investors, deepening skepticism about Lula’s commitment to fiscal austerity. Hoffmann has openly criticized Finance Minister Fernando Haddad’s efforts to shore up the country’s public accounts. The Brazilian real hit session lows after the announcement, falling as much as 1.46% against the dollar amid broad strength for the greenback.
But even within the government, the decision to name Hoffmann to such an influential post at such a delicate time for Lula’s presidency was greeted with shock, according to multiple government officials who spoke on condition of anonymity.
Lula has started the second half of his term this year with multiple challenges. His approval ratings have fallen to the lowest levels of his career as food prices soared; the economy is slowing as the central bank is expected to take the benchmark interest rate to 14.25% next month; and mounting budget deficits continue to put pressure on the Brazilian real.
He is now preparing a cabinet reform that could make room for more centrist parties, a strategy to bolster his political coalition ahead of the 2026 presidential election. But the selection of Hoffmann “is bad news,” said Paulo Nepomuceno, a trader on Mirae Asset’s derivatives desk. “The market doesn’t see her as a conciliatory figure, and she doesn’t have much influence in Congress either.”
Hoffmann, 59, previously served as chief of staff to former President Dilma Rousseff and is known for her fierce rhetoric and frequent targeting of anyone she sees as an ideological foe or threat to the president, even if they are ostensible allies.