Sunday, April 18, 2021

“We haven’t really grown for at least 40 years,” says economist

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The final result of the Gross Domestic Product that will be released by IBGE this Wednesday (3), should confirm a fall of at least 4% in Brazilian productivity. Without emergency aid, this fall would be even greater – at least twice as much, according to this study by USP. At the same time, the prospects for advancing the liberal agenda of the Bolsonaro government, led by the now former super-minister Paulo Guedes, are being undermined every day by the old populist practices of the political universe of Brasília.

For the economist Paulo Pereira Miguel, partner and investment director at the Julius Baer Family Office, since the approval of the spending ceiling in 2018, the discussions that should be on the table, such as tax reform and various spending cuts, did not happen – at least not at the speed necessary to ensure the efficiency of the ceiling. Miguel, however, disagrees with his colleagues who advocate a review of the current tax regime in the short term

“It doesn’t seem to me that there is an imminent need to fix the ceiling right now. The right thing to do is make some tough choices and leave it to revise the ceiling in 2026, as scheduled,” explained the economist in an interview with EXAM. “And, in fact, if we have good triggers, hitting the roof can even be positive, because it triggers the triggers. We need that to have an adjustment.”

Miguel defends the processing of PEC 45 as the country’s top priority at the moment, leaving a deeper discussion about the Brazilian tax regime for at least 2022 – and sees the exemptions as an important source of funds for the federal budget. This plan, however, comes up against the culture of prioritizing sectorial agendas to the detriment of collective ones. And, mainly, in the lack of leadership in the country.

Read the full interview below:

There is a lack of people who have a vision of the country, a vision that if we do not make fundamental choices, we will not move. There are few systemic decisions, but they have a great impact. But, for that, it takes leadership, diagnosis. And the diagnosis is in place. We all know that we need tax reform in this direction. And then we started to collect a little bit of growth and things change. It lacks conviction and leadership, more than anything. The state needs to work. Companies need to produce. We need to pay tax in a simple way.

Paulo Pereira Miguel, partner and investment director at Julius Baer Family Office

EXAMINATION: Apparently, emergency aid will be extended outside the spending ceiling. How does the market evaluate this “scoop”?

Paulo Pereira Miguel: Last year, the great fear was that a permanent program would be created, spending R $ 20 or R $ 30 billion more per year. The discussion is now different. If it has to be extra ceiling, it will be temporary and contained. Something around R $ 200 reais, for three months, which gives less than 0.3% of GDP – whereas before it was talked about 1% or more. Therefore, I do not think there is a rhetorical break in the ceiling, but an exceptionality of the second wave that, if it is contained and involves a commitment to reinforce the ceiling in the medium term, will be palatable for the agents involved.

Some economists argue for increased social spending during the pandemic, including from a review of the spending ceiling. What is your opinion about this?

I strongly disagree with the overhaul of the ceiling. I see many kicks, saying that the ceiling prevents doing this or that, but in fact, it prevents our debt from exploding. The ceiling may not be the best rule, I even think that it should be improved over time, but it is necessary to establish fiscal criteria that are credible and indicate a path of solvency in the medium term. Shall we abandon the ceiling to put what in its place? The fact is that we have a growing indebtedness, one of the largest among the emerging ones, and fiscal rules that in the medium term do not suggest solvency. The ceiling is the only long-term reference we have in this regard.

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