Brazil’s Government Fights Back Against Fake News Threat to President Lula’s Popularity

(Bloomberg) -- Brazil’s government is preparing a campaign to fight back against the spread of fake news regarding a popular instant payment system that has damaged President Luiz Inacio Lula da Silva’s reputation.

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Communications Minister Sidonio Palmeira will lead the plan conveying the message that Pix — which has over 150 million users — remains a safe, confidential and tax-free payment method, according to two people with knowledge of the matter. It will combat false rumors that the government will levy charges on transactions through that system.

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More broadly, the initiative seeks to bolster the president’s image and fortify efforts to reach voters on social media going into the second half of his term.

Lula is rushing to halt a controversy that started last week when opposition lawmaker Nikolas Ferreira, riding a wave of rumors about Pix, called attention to government plans to increase supervision of the payment platform. In an expertly crafted video, an articulate Ferreira suggested that the expanded oversight could open the door to taxation.

The number of system payments plunged after the publication of that post, which has been viewed over 300 million times. The backlash prompted Finance Minister Fernando Haddad to deny the speculation of new levies and led the administration to back off its oversight plans.

It’s the first crisis faced by Palmeira, who stepped in this month as part of a strategy to help the leftist head of state deal with mounting challenges.

The government has published a provisional measure reinforcing that Pix will not be taxed, and the central bank took action by publishing its own social media video against the false claims. Meanwhile, Haddad is being advised to give more interviews to media outlets that reach common citizens, and he is making a stronger effort to tout economic growth and social programs.

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Still, the Pix controversy has augmented concerns over Lula’s reelection prospects in 2026 given that his approval level has already slipped below 50% and many Brazilians say the economy is poor and will also get worse.

While unemployment stands at a record low, the real has weakened roughly 19% in the past year, fanning both above-target inflation and expectations that the central bank will be forced to raise borrowing costs to 15% by December.

Pix, a digital platform similar to Venmo or Zelle launched by the central bank in 2020, quickly became one of the most popular payment methods in Brazil, surpassing both credit and debit cards. In mid-December the platform set a record with over 252 million transactions in just one day, according to central bank data.

The system allows anyone with a bank account to instantaneously send and receive Brazilian reais. It is particularly important for small business owners who can obtain their profits immediately without having to wait for days until credit card purchases get cleared.

In 2021 a bill prohibiting any charges on the platform was introduced in Congress, though debate on that proposal never took off.

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“The government has already made it clear through its measures that Pix remains strong,” Chief of Staff Rui Costa told reporters on Monday. “Pix is a way to integrate society and its use has spread. A tax on Pix has never been considered.”

--With assistance from Simone Iglesias and Maria Eloisa Capurro.

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