Event "Brazil of the Future" discussed the risks and benefits of fiscal adjustment

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By Thais Valley
The Brazil event of the Future, sponsored by the Academic Viscount of Cairo Center - CAVC - between five and eight in May, brought together experts to discuss the current economic situation, the factors that led to it and what can be expected of the measures adopted by the government such as fiscal adjustment. They joined the discussion table the Fernando Monteiro Rugitsky teachers and Simão Davi Silber, FEA, and Octavian Barros, chief economist at Bradesco.

Professor Simon Silber said that the worst way to get fit is with recession. He pointed out that the tax burden in Brazil is high, disproportionate to the per capita income compared to developed countries. However, the expense is not quality because of the service of public administration and expenditure on retirement consume most of the collection, leaving little for investment. Professor Rugitsky agreed with him, saying that the currently ongoing adjustment can lead to problems in the economy, especially as the foreign market is not favorable at the moment.

To illustrate the international scenario, recalled other government measures have not succeeded, as the fall of the Selic and the regulation of the foreign exchange market, which resulted in increase in the dollar price. the expectation was that the risk for investment diminish due to low interest rates and the products would become more competitive. But "the result did not come," he said. According to Barros, the external demand is weak and therefore the depreciation of the exchange is not paying off the expected effect.

Another unfavorable as the economy was the government's attempt to strengthen the interests of industry rather than the financial sector. But as said the teacher, these groups have similar interests, and the government lost support on both sides.

While recognizing that make fiscal adjustment over a period of spending cuts is complex, especially if it involved cutting investment and tax increases, Professor Silber stated that the primary surplus is a matter of survival, and that he should guide the debt trajectory. Barros believes that other changes are also needed, such as creating rules for the tax control, such as the relationship between the treasury and public banks (such as BNDES and Caixa). This is because the infrastructure investments are very committed without the involvement of government, and that the main come from the private sector, the rate of return should be higher.

Analyzing the economy more broadly, Silber said 40 years ago that growth is modest, process started after 1980, with the oil shock in destabilized. Until then, the country had the second GDP growth rate in the world, after Japan According to him, presently our economy is very closed, with meager production gains, little competition and low dynamism. "The Brazilian market represents 3% the world market, and the other 97%? " asks the teacher, adding that "We are out of the world."

Exemplifying this problem, Barros noted that we are the country with the highest number of multinationals, but they are not integrated into their headquarters, allocating most of the production to the domestic market. This is an unusual fact, since the goal would be to export for the company to reduce costs and be less vulnerable to local order changes.

He pointed out that another alarming aspect of this scenario is that Brazil is the second most diverse emerging country industrially, second only to China. However, it is not competitive in any segment, and our exports are composed mainly of commodities. He concluded by saying that "Brazil is very precarious towards governance" and that we must invest in it. In addition to these challenges, there is low population growth in the country, which makes the challenge even greater production by reducing the number of young people. So, for him, a more flexible labor market is key.

Data do Conteúdo: 
Monday, 25 May, 2015
Data de expiração: 
Wednesday, 9 September, 2015

Departamento:

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