In Rio, Economy Minister Claims No Reason for Pessimism in Brazil

RIO DE JANEIRO, BRAZIL – Economy Minister Paulo Guedes said there is no reason for pessimism in Brazil. In his opinion, Brazil is going through a period of exceptional institutional development.

“I am seeing robust Brazilian institutions flourishing and improving. There is no reason for pessimism. Brazil is advancing institutionally,” he said as he attended the opening BNDES (Brazil’s Economic and Social Development Bank) meeting with the Social and Sanitation ‘S’, at the bank’s headquarters in downtown Rio de Janeiro: “[Brazil] will return to growth by doing the right thing, improving its institutions”.

Guedes once again advocated payroll tax relief. He says a country that has payroll tax and doubles the cost of labor does not seek to create jobs. “Payroll taxes are the cruelest tax, weapons of mass destruction of jobs. Tens of millions of jobs are destroyed by these excessive payroll taxes. It is a crime against the Brazilian worker,” he said.

He also pointed out that the BNDES is resuming its functions, with financing for social and sanitation projects, which will be reflected in education and health. The minister drew attention to the situation of children dying in the country due to lack of sanitation: “How are we going to save the children if they do not even have proper health, due to lack of sanitation?”

“Infant mortality is brutal. If children play without water, without sanitation, health, there is nothing down there, they die early, they get fatal diseases. This is a crime against Brazilian children,” he added.

“The sanitation ‘S’ is the master support for the new BNDES. It is a social legacy that the new BNDES, in its role as an articulator of these policies, wants to leave behind”.

According to the minister, during the electoral campaign and later, in the preparation of Bolsonaro’s government program, the team diagnosed the uncontrolled growth of public spending for three, four decades: “This caused hyperinflation, external defaults, price freezes, seizure of financial assets and, more recently, very high interest, high taxes, corruption in the national democratic system”.

Guedes also said that this excess spending, which reached 45 percent of GDP, was the source of several inaccuracies and dysfunctions, not only of the economic system but also of the political system. In his opinion, governors are elected and are unable to carry out the needed projects due to the hardship of the state budgets. “Similarly, we want to decentralize public resources. The people are in the states and municipalities.”

Paulo Guedes said that excess spending is only one dimension of the problem, and the other is poor management of public resources. However, according to him, one of the government’s main issues was solved with the Social Welfare reform, which lowered long-term interest rates.

“They are already at five percent and continue to drop. Unlike the previous government, in which low-interest rates fell, but the long term failed to follow because there was a fiscal imbalance. This time, as we have done with the Social Welfare, we have set a 25-year stability target, at least in terms of controlling these expenditures,” he said.

The minister added that the government has speeded up privatizations and that BNDES has returned the funds invested by the federal government in the recent past.

“The BNDES, in popular language, was rerouted. The BNDES, with an extraordinary technical staff, rerouted outstanding quality people, but the mission was slim: to leverage national champions, part of the gigantic perverse cash transfer machine. In Brazil, those with more economic or political power capture public budgets. Resources are diverted from their primary purpose, which would be to help the most impoverished populations,” he pointed out.

The minister denied that the redirection of the bank’s resources is contrary to private initiative projects. “We are fully in favor of the private initiative. Nothing against it, but on their own merits. Nobody can become a national champion, empowered by the government. This is a way of allocating resources and particularly if it later turns into campaign money to finance those who have previously financed it”.

“This is absurd. It’s corruption at its best, by its own admission.”