Lula faces new legislative dynamics with center-right congressional leaders

The Brazilian congress has elected new leadership that will play a decisive role in the administration of President Luiz Inácio Lula da Silva and could significantly influence his prospects for re-election. 

Over the weekend, lawmakers elected senator Davi Alcolumbre and congressman Hugo Motta – representing the center-right parties União Brasil and Republicanos, respectively – to lead the senate and the chamber of deputies for the next two years.

Aware of the risks of supporting candidates from the leftist ruling Workers’ Party (PT) and facing potential defeat by center-right forces, Lula backed both Alcolumbre and Motta, despite their lack of real alignment with the federal government.

The new congressional leaders do not represent a significant shift from their predecessors, Rodrigo Pacheco in the senate and Arthur Lira in the lower house. However, Alcolumbre and Motta assume their roles at a critical moment for Lula, whose approval ratings have been declining rapidly. If this trend continues, he may face difficulties in his bid for re-election in the October 2026 elections.

"Under this new leadership, the Brazilian congress can both support and obstruct efforts to restore the government’s image under Lula," said Lucas Fernandes, a political analyst at local consulting firm BMJ Consultores, told BNamericas.

As part of his strategy to improve public approval, Lula plans to advance several measures in congress, including an income tax reform. This reform proposes raising the tax exemption threshold to 5,000 reais (US$855) per month, more than double the current exemption of 2,260 reais per month.

"Any president seeking re-election needs a hallmark achievement to showcase during the campaign, something easily recognized by the broader population. Raising the income tax exemption threshold is an example of a measure with high public visibility, and if congress approves it this year, it could take effect next year – potentially aiding the government’s image ahead of the 2026 elections," Fernandes added.

Beyond the tax reform, congress under the new leadership will also address other key issues, such as measures to limit high public-sector salaries and proposals to raise the cap on military pensions. These initiatives are seen as crucial by the government to curb the growth of public spending.

Additional measures aimed at improving the business environment include reviewing regulations for concessions and public-private partnerships (PPPs), creating incentives to attract datacenters, establishing a legal framework for artificial intelligence and addressing the regulation of big tech companies.

During the tenure of the new congressional leaders, the government and lawmakers will also need to tackle the sensitive issue of enhancing transparency in the management of budget resources controlled by lawmakers.

In recent years, congress has gained substantial influence over the federal budget, with significant portions allocated without adequate transparency, raising concerns about inefficient use of resources. The government aims to reform this process to regain at least significantly more control over budgetary decisions.