Opinion: there is no clear Plan, the Market Works with Tools
The training of anticipations and prices of assets (exchange rate, interest, scholarships) is very sensitive to government signals, and these were very noisy – reflecting the absence of an organized plan and the almost blind objectives implementation of overlapping and expansion policies of past has failed. The next government therefore tests the market, creating test balloons to calibrate how far the rope can be stretched.
The fundamental problem is the misunderstanding of the economic and political difference on the way in which the anticipations of economic agents are shaped by the transition. Two elements must be considered: the impact of the global context on domestic prices and the way in which government credibility is built with economic agents. Take the exchange rate as an example – a gateway to all other assets because it affects the portfolio and the interest curve.
It would be wrong to interpret the very present level of the exchange rate – faced with all the noise and heat of the transition – as a sign of good humor of investors. Since the beginning of November, the dollar has weakened in the world, although moderately, including emerging currencies, due to a reassessment of the best trajectory of interest rates in the United States.
In this context, the price of the dollar in Brazil should be around $ 4.60 against actual values in the House of Representatives of $ 5.30, which mainly reflect the discomfort in the face of the signs of the next government. It should be noted that this break between the expected and effective rating was reduced – which suggests that the market was counting on the budget responsibility of the PT – but returned.
The other element that politicians often forget is that the construction of the credibility of the government is a process – not a unique event – and the fact that there is no predictable reaction of the prices of assets to a new measurement n ‘does not imply apathy or advertising market approval.
The apparent calm on the surface – as we can now see in the exchange rate, for example – is misleading, because it can accumulate “potential energy”. Market memory is not bad. The bad decisions of today are marked in the training of expectations. It is not a game that always starts from scratch. Bad news here and there is an accumulated reputation, in this bad case.
Testing market limits is not a judicious position, because it makes the environment more conducive to accidents, with a sudden change in the mood of investors, sometimes interacting with triggers who seemed to have been of little importance, And it was therefore in the absence of former Minister Joaquim Levy when the budgetary emergency announcement for 2015.
In these cases, the directional management is more expensive or even politically impossible – to use The terminology of economists, the political options available are “dependent on the path.” Referring again to the Dilma government, opinion was that losing the quality of investment was a serious error.
The second half of 2015 was marked by a Important decoupling of realism compared to other currencies, which has only been corrected with growing discussion on decoupling.
Not understanding these dynamics and reacting to the novice behavior of the revised market to use volatility and a more risky environment. In this context, it becomes imperative that the next government is in time to define a flight plan which largely indicates an organized agenda to deal with tax challenges, with good diagnostics and solid priorities, which seems unlikely today .
Without this, meet the expectations in terms of training and price. The problem goes beyond the formation of a macroeconomic balance of less good quality, with higher interest rates, due to the choice of an economic police force that characterizes tax recovery. In the absence of a flight plan, the risk is that the economy falls into an unstable balance – where no slice of the new government, even corrected, translates into a lack of anticipation and confidence to return to the previous level.
After all, to what extent is the fiscal policy predictable? What is the scale of the financial risk in the face of violations open in the transitional PEC? Will Gilmar Mendes give another injunction modifying the rules in the middle of the match? What plinth will replace the roof and how flexibility will be? Is it possible to exclude the fiscal dominance scenario? Will the inflation target of 3 % be maintained in 2024? In all businesses, we have an indefinite income trajectory Insend towards asset prices. Difficult to make the slightest projection.
