Brazil markets tumble on Lula's first full day in office - Reuters.com

BRASILIA, Jan 2 (Reuters) - Brazilian markets delivered a withering verdict connected leftist President Luiz Inacio Lula da Silva's archetypal afloat time successful bureau connected Monday, aft helium pledged to prioritize societal issues and ordered a budget-busting hold to a substance taxation exemption.

Lula's determination to widen the substance taxation exemption, which volition deprive the Treasury of 52.9 cardinal reais ($9.9 billion) a twelvemonth successful fiscal income, was a stinging rebuke of his concern curate Fernando Haddad, a Workers Party (PT) loyalist who had said it would not beryllium extended.

Haddad, who is seeking to dispel marketplace fears that helium mightiness not support fiscal discipline, took bureau connected Monday, pledging to power spending. "We are not present for adventures," helium said.

Markets seemed unconvinced.

The existent currency mislaid 1.5% successful worth against the dollar successful day trading, portion the benchmark Sao Paulo banal marketplace scale (.BVSP) ended 3.06% down. Shares of state-run lipid institution Petrobras (PETR4.SA) retreated astir 6.45%.

In speeches delivered astatine his inauguration successful Brasilia connected Sunday, Lula promised that tackling hunger and poorness would beryllium "the hallmark" of his 3rd presidency aft 2 erstwhile stints moving the state from 2003 to 2010.

Financial analysts said the commencement of Lula's 3rd presidency was successful enactment with his run promises, and looked akin to earlier Workers Party policies that led to a heavy recession.

Lula narrowly defeated far-right incumbent Jair Bolsonaro successful October, swinging South America's largest federation backmost connected a left-wing track.

On Monday, Lula instructed ministers to revoke steps to privatize authorities companies taken by the erstwhile administration, including studies to merchantability Petrobras, the Post Office and authorities broadcasting institution EBC.

On Sunday, helium signed a decree extending an exemption for fuels from national taxes, a measurement passed by his predecessor aimed astatine lowering their outgo successful the run-up to the election, but which volition deprive the Treasury of 52.9 cardinal reais ($9.9 billion) a twelvemonth successful fiscal income.

The national taxation exemption for fuels volition past 1 twelvemonth for diesel and biodiesel and 2 months for gasoline and ethanol, a decree published successful the authoritative gazette showed connected Monday.

Gabriel Araujo Gracia, expert astatine Guide Investimentos, said Lula's plans to summation societal spending, grow the relation of authorities banks and abolish a constitutionally mandated spending ceiling harked backmost to the worst days of Workers Party rule.

"The policies punctual america of Dilma Rousseff's authorities alternatively than Lula's," Gracia said, referring to Lula's handpicked successor, who was impeached portion successful office. "Her policies led to Brazil's worst recession since 1929."

Lula, who lifted millions of Brazilians from poorness during his archetypal 2 terms, criticized Bolsonaro for allowing hunger to instrumentality to Brazil, and wept during his code to supporters connected Sunday arsenic helium described however poorness had accrued again.

Allies said Lula's newfound societal conscience was the effect of his 580 days successful prison, Reuters reported connected Sunday.

Lula kicks disconnected his 3rd statesmanlike word aft persuading Congress to walk a one-year, 170 billion-reais accrued societal spending package, successful enactment with his run promises.

"The bundle ended up being bigger than expected, with imaginable repercussions for nationalist indebtedness sustainability," Banco BTG Pactual said successful a probe note.

Lula spent his archetypal time successful bureau gathering with much than a twelve heads of authorities who attended his inauguration.

The meetings started with the king of Spain, and continued with South American presidents, among them the leftist leaders of Argentina, Chile and Bolivia, arsenic good arsenic representatives from Cuba and Venezuela, and Vice President Wang Qishan of China.

On Twitter, Lula said helium had received a missive from Chinese person Xi Jinping expressing a tendency to summation practice betwixt the 2 countries.

"China is our biggest trading partner, and we tin further grow relations betwixt our countries," Lula added.

The caller president is besides acceptable to be the aftermath of Brazilian shot prima Pele, who died connected Thursday astatine 82 aft battling colon cancer.

Lula volition wage his respects and wage tribute to Pele and his household connected Tuesday morning, the president's bureau said successful a statement.

($1 = 5.3633 reais)

Reporting by Anthony Boadle, Marcela Ayres and Gabriel Araujo; Editing by Matthew Lewis and Jonathan Oatis

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