The state of São Paulo is the destination of 45% of all sales in the Parana. Any measure that the wealthiest state in Brazil takes to contain the pandemic of covid-19 it also affects the neighboring state. In the optimistic estimate of the Secretary of Finance and Revenue of Paraná, Renê de Oliveira Garcia Júnior, the two weeks in which São Paulo is in the strictest quarantine should generate a loss, alongside Paraná, of 500 million reais in collection.
In 2020 alone, with all the restrictions in the São Paulo economy, the loss caused by the decrease in sales volumes in Paraná totaled 1.5 billion reais, most of which in fuels. Even so, the state of the South managed to go against the fall of 4.1% of the Brazilian GDP, and to register a growth of 0.1% last year.
According to the secretary, in order to avoid a recession, the state government implemented a series of expenditure containment measures and, more recently, sanctioned two laws, that of Quality and Fiscal Responsibility and the State law of Economic Freedom. The objective is to guarantee fiscal balance, without compromising the state’s cash flow, and to stimulate business.
Another measure was to create the Tax Recovery and Stabilization Fund of Paraná, linked to the State Treasury Department, in order to mitigate the effects of economic recessions or fiscal imbalances and to provide resources for situations of public calamity.
Economist, dgrantor and master in economics from Fundação Getúlio Vargas (FGV), in Rio de Janeiro, Renê de Oliveira Garcia Júnior jhe was president of the Securities and Exchange Commission (CVM) and project coordinator of the Brazilian Institute of Economics. He took over the Secretary of Finance of Paraná two years ago and shortly after his first year in office came the biggest challenge: the covid-19 pandemic.
Defender of a liberal and minimal state, he believes that the role of a government is “not to disturb the economy”. He is eyeing the Administrative and Tax reforms, which are under way in the National Congress. See the main excerpts from the exclusive interview he gave to EXAM.
How did Paraná manage to go against Brazil and not go into recession?
This is related to two sectors that had a very good year and that are the basis of the economy of Paraná. Agribusiness broke a harvest record, and exports were also very good. The other was that right after the pandemic, industrial production dropped 27% in May, but it returned during the end of the second half of 2020, and was responsible for this resumption, mainly for the search for more qualified jobs. Paraná is the second state in generation of formal employment [saldo positivo de 52.670 em 2020], then it is the cooperation of these two sectors. The participation in the service sector is small, so the result was not bad.
How to have a balanced budget with two years of pandemic?
We made a budget mattress in 2019 and 2020 and that is why we had a balanced account environment. If the pandemic continues for another two or three months, then the issue will start to become very complex. We made a very realistic budget for 2021 [de 50,6 bilhões de reais]. It presents a situation of a need for resources of almost 3.5 billion reais, a revenue very close to 2019. We have here the perception that the economy would not perform as expected with the euphoria of the end of 2020. Mine The big question at this point is, if the Brazilian economy collapses during the first quarter, we may have a compromise in the budget forecast, which there is a deficiency of something like 16% of the resources budget. The biggest problem is that in 2021 we will not have help from the federal government, with the transfer of resources from the health sector, from the covid-19 pandemic. We will also not have the issue of non-payment of the debt with the Union.
The largest commercial partner in Paraná is the state of São Paulo. How do these two weeks in which only essential services can function in the neighboring state affect Paraná’s economy?
In the collection, still optimistically, it means a loss of collection of 500 million reais or something proportional to 22% of the collection, only in these two weeks. We lost 1.5 billion reais last year, of which 600 million were fuel alone. The volume of exchanges between the two states is very large. São Paulo is the largest commercial partner in Paraná, with 45% of foreign sales.
How to implement a liberal agenda in the state at a time when the federal government is going in the opposite direction, more interventionist?
I think the best thing the government can do is not to interfere, not to create situations of uncertainty, not to disturb. So I think that here in Paraná we had a record volume of private sector investment and the second largest public sector investment in history because the state government does not contribute to creating situations of potential imbalance in the resumption of growth. The best secretary of finance is one who does not appear or know the name. If he shows up a lot, it is because there is something wrong. I do not believe in big plans to resume. The possible resumption is with investment in infrastructure, guaranteeing the payment of the servers, payment of precatorios, of the remains to be paid, that is, not disturbing. Every time we try to imagine an agenda that is very committed to interventionism, it ends up giving the wrong signals that can be understood as unsustainable.
How can the Administrative Reform and Tax Reform projects in progress at the National Congress impact the state’s accounts?
Administrative Reform is important, but it needs to be bold, it cannot be exclusively aimed at reducing wages. It needs to generate a team of servers so that the state is more efficient. Tax reform is also of paramount importance. In the case of the states it is even more serious because the ICMS as the tax was created at the time when there was a strong industrialization of Brazil. With the participation of the industry falling from 25% to 14% of the economy and the services being the dominant economy, the ICMS starts to lose substance, it is falling apart, it is dying, it is dying. It has to change mainly to stop being cumulative. It needs to have a broader base, with the lowest possible rate. This is a big change in the formula for viewing taxes and the great difficulty is that it will invade services, which today are considered to be municipal ownership.
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