Lula says reducing poverty is Brazil's priority, not fiscal containment

SAO PAULO (Reuters) -Former leftist President Luiz Inacio Lula da Silva, who is leading opinion polls ahead of an October election, said on Wednesday that reducing poverty and inequality must be Brazil's priority over fiscal discipline.

Lula said at a news conference that budget resources must be increased on social programs even if that means sacrificing a constitutionally-mandated spending ceiling.

"We have to make inequality a priority and not the spending cap," he told reporters of independent websites.

"Brazil has to put the poor back in the budget and tax the rich," he said, referring to his Workers Party support for taxing corporate profit and dividends.

Lula, 76, governed Brazil from 2003-2010 and his government's social programs pulled millions of Brazilians from poverty. He spent time in jail on corruption charges that were later annulled, allowing him to run for office again.

He is expected to face far-right President Jair Bolsonaro in the presidential race this year, though neither man has formally declared his candidacy.

Lula's clear lead in early opinion polls has some investors worried that his return would deepen Brazil's budget deficit.

But despite his tough talk on cutting poverty, Lula drew praise from some investors as he again suggested he could name moderate Geraldo Alckmin as his running mate.

Some analysts said the comments helped boost the real to its strongest level against the dollar since November.

"I would have no problem if I had to share a ticket with Alckmin to win the election and to govern this country," Lula said.

Chief economist at Necton Investimentos, Andre Perfeito, said the comments were regarded as "a signal of fiscal responsibility on the part of an eventual Workers Party administration."

Lula criticized Bolsonaro for ignoring the pressing issues facing Brazil and dealing only with his personal interests and political self-preservation.

"I cannot want to be president to solve the financial system's problem ... for those who became richer in the pandemic," he said. "There is only one reason for me to be a candidate: to prove that Brazilian people can be happy again."

(Reporting by Anthony Boadle and Eduardo SimoesEditing by Marguerita Choy and Grant McCool)