Mansueto: “It does not seem that the Government wants to take Advantage of the Doubt”
Mansueto Almeida has always been one of the most constructive voices of Faria Lima. The IPEA career servant is an experienced and apolitical man who served the country as Minister of Economic Control and Minister of the Treasury. It has easy traffic at Congress and in the judicial system because it is used to explain the compromises of the economy to representatives, senators and higher judges.
Today BTG chief economist, whenever investors are horrified by a Brasília movement, Mensueto can express a constructive vision and show the glass half full.
A month ago, for example, Mansueto declared during an event in Harvard that despite the deplorable statements of the transition team, “gradually, the new government will see what the company is and has no Reason to change “. And barely two days ago, he gave an interview to Value whose title was “Pec fears, but it is necessary to abandon doubt”.
But 48 hours later, while the government changed the law of the State to the House of Representatives and insists on obtaining authorization to spend 200 billion dollars more than it already has in the 2023 budget, Mansueto could not be too constructive. According to him, “the government has realized that it seriously increased uncertainty about its real commitment in budgetary adjustment, and that it would reduce private investment and lead to higher interest rates Longer”.
In a conversation with Brazil Magazine this morning, in the midst of increasingly turbulent markets, Mansueto said that he was increasingly concerned about the signs indicating that the elected government – and the congress – would be sent in the direction of the Brazil in the coming years. The message to Brasilia must be clear: when not to build more independent economists can give you more credit, it is time to understand that the problem is yourself.
The new government says that it is attached to budgetary responsibility, but today, the interest rate that the Treasury pays for funding has returned to the levels which prevailing before the approval of the expenditure ceiling. Where are we going? The market was very enthusiastic about the idea of a calm election, without risk of institutional decoupling.
Thus, the foreign investor succeeded in a rise in the price of assets in the days which followed the election of President Lula. The second day after the end of the second round, for example, the dollar rose to $ 5.02 and the foreign investor began to buy actions from Brazilian companies every day.
However, when the elected government has spoken of the gap between the tax agenda and the social agenda, and when it highlighted a request to explode the expenditure ceiling of $ 200 billion during the first year of the government – Without specifying the success of such a grandiose expenditure paid – this has changed the perception of risks the market, in particular the national investor, who has come to believe that we will have a spending government, which will lead to unbearable growth public debt.
It was the perception of asset prices: too expensive a dollar, an interest curve that says that we will get around 13% interest for the next 10 years, and a scholarship where companies are free, but no one wants take the risk. The elected government must understand these dynamics and change rhetoric to reverse these disturbing trends. Some members of the new government call it “bad humor”.
They say that the market did not vote for Lula, so he does not want to give the benefit of the doubt to the legitimately elected left government. There is not such a mood on the market. The market is me, you, the taxi driver and anyone working in Brazil can provide and make investment decisions. Anyone who spares ends up investing in a fixed savings or income fund.
We are all creditors of Brasilia. The market simply does the calculations on the basis of the facts and signs given by the government, that is to say the government. The signals of the elected government were that he wanted to spend 200 billion dollars in addition to what was already planned for next year’s budget, without explaining how this account would be paid.
Will we have tax increases? There are three important points in this discussion. First, for the Lula government to pay 600 dollars from Bolsa Familia, it would only need $ 50 billion. Second, with an additional $ 50 billion, it will be possible to realign the resources of the science and technology fund, the popular pharmacy, the white Aldir law, the Paulo Gustavo law, etc. There will still be resources to increase public investment.
Thus, an authorization to spend of $ 100 billion would be more than sufficient to launch the government. Third, if the government begins with additional expenses and a primary deficit of $ 200 billion (2 % of GDP), the debt will almost certainly enter an unbearable growth trajectory. Market by doing arithmetic, he is afraid. Gross domestic product? This will lead us to an even stronger debt growth than in England.
But how will the elected government hold its campaign promises without increasing spending? Let’s be clear. Some of the candidates’ promises will not be held, regardless of the result of the election. For example, the promise to increase the tax exemption range to $ 5,000. The cost of this policy is a permanent annual collection of more than $ 100 billion. This will not be done in a country that does not spare enough to reduce public debt.
If this is approved, the effect will be a sharp increase in the cost of financing the Treasury and additional inflation. It is important to understand that the promise of an increase in social spending can only be held respecting the tax ceilings. If the government does not want to cut in other expenses to increase social expenses, it will be necessary to increase the tax pressure to control the growth of the debt which is already high in Brazil.
But what taxes will we increase? All those who do the calculation know that with $ 50 to $ 70 billion, the government will be able to keep its most important promise: pay 600 dollars at Bolsa Familia and create another $ 150 for children from 0 to 6 years old. There is more: with the fight against fraud – since there was an inexplicable increase in families with one person – it would be possible to save nearly $ 15 billion to help pay $ 600.
It seems that the foreign investor is enthusiastic by Brazil, and the elected government makes the environmental issue one of its priorities. Shouldn’t that lead to an increase in investments whatever the tax issue? Today, I spoke with a huge international investor, which has been investing in Brazil for many years and has worked in the field of the environment.
Global investors have generally been more enthusiastic about Brazil than by locations – but now that is changing. This investor asked me what to do now. I said, let’s wait until January, let’s see how the government is advancing. Perhaps we will have the return of this practical calmar to which so many of us expect.
Because it really doesn’t make sense to kick the foot as much as the fact … but the investor asked me: “Well, but you have everything to believe That this exploitable calmar will come back, or is it just hope? ” I said, “Now it’s just hope.” Where are the least priced risks? What new fire does the government still give? Vice-president Geraldo Alcmene assured a few days ago during the Guarja seminar that there would not be “cancellation” of the reforms already made.
But the government was able to adopt last night a change in the law belonging to the State – which has been in force since 2016. If this happens to the law of the State, which I thought that many, I thought that Congress did not would not allow, this could happen with other laws adopted in the past six years. For example, the new government can modify the long -term rate (TLP) by artificially reducing this rate and in BNDES turbo.
It would be terrible because, depending on the intensity of this movement, the BNDE would again play against the central bank in consumption control and investment to slow down inflation.
Will anyone increase confidence in Brazil if we change the new sanitation panel? Or if we repeal the 2017 Labor Law and if the BNDES becomes the main source of funding for investment in infrastructure and the increase in subsidies? All this will not increase the growth and job creation. The result will be less investment, less growth and more inflation.
Why do you think that President Lula does not understand these dynamics? Lula has always been a pragmatic, always hearing people talking about the dilemmas of the economy: the cost of doing something and the benefit that results from it. But now it seemed to be listening just a narration. Just one side of the conversation. He did not seem to have access to the counter.
It costs the country and will cost its popularity and even its international image. Can you repair this path to a government that has not yet started? Of course, she must repair it! The first step is to give up authorization to spend $ 200 billion on the ceiling next year.
If you start with such a large expenditure, it will be as if the government reported that it “does not want the benefit of doubt” and that it could opt for an uncertain budget adjustment strategy. It’s not just the president – who must understand this. Each deputy and senator who includes the challenges for Brazil should also help.