(Bloomberg) Brazil’s Finance Minister Fernando Haddad expressed concern about the country’s fiscal outlook at a meeting with investors on Friday afternoon, sending assets plummeting and sending citizens scrambling to contain the damage.

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Haddad told investors that if parliament doesn’t approve his proposed revenue measures, deep spending cuts would be needed to meet the country’s fiscal goals, according to people familiar with the matter, and he also spoke of the importance of discussing other ways to cut spending, such as decoupling pension payments from minimum wage increases.

But he left investors with the impression that he was unable to convince President Luiz Inacio Lula da Silva of the need to cut spending and that he would ultimately have no choice but to change the fiscal framework approved by lawmakers last year, according to people familiar with the matter who spoke about the talks on condition of anonymity.

Haddad said he supports a structural review of spending but seemed unsure whether his approach would have support within government, one of the people said.

Brazilian assets fell sharply after the meeting. The real fell 1.7% against the U.S. dollar on Friday, the second-worst among the world’s major currencies after the Mexican peso. Swap rates also rose sharply, with contracts due in January 2027 rising by about 60 basis points.

The turmoil comes against the backdrop of election shocks from India to Mexico that have seen investors around the world unwind once-popular trades in emerging markets.

The furore began when Haddad, speaking to reporters in Sao Paulo, said afterwards that market interpretations of the meeting were “wrong” and “unreasonable” and that he had never suggested changing fiscal rules.

If spending rises more than expected, the government may freeze some funds from the federal budget, but that would be “totally normal and in line with the fiscal framework,” Haddad said.

“What has happened is very serious. You can’t use closed-door meetings to sell something to the market that doesn’t exist,” he said.

Brazil’s finance minister is facing investor skepticism about his efforts to meet a target of eliminating the primary budget deficit, which excludes interest payments, by the end of the year, amid growing pressure from President Lula to boost spending to boost Latin America’s largest economy.

Haddad in April relaxed next year’s fiscal targets but insisted the 2024 target was achievable.

–With assistance from Barbara Nascimento.

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