The most relevant
aspect of the document “A Bridge to the Future,” launched last week by
the Brazilian Democratic Movement Party (PMDB), is that it lucidly
addresses themes forbidden in the Brazilian economic debate. The
prohibition was promoted by the discourse and the practice of the
Workers’ Party (PT) administrations since the ascent of Luiz Inácio Lula
da Silva to power, in 2003. It is clearly a sign by Vice President
Michel Temer, who presents himself as alternative in view of a possible
impeachment of the president.
In the worst moments of the current political crisis, Mr. Temer talked to businesspeople in São Paulo. He has a conservative politician’s profile, but still those who talked with him had doubts about what he would do in case he took the presidency of the republic. Moreover, one of his allies in the corporate world — Paulo Skaf, president of Fiesp, the powerful trade group of the São Paulo state industry — makes an open campaign for the dismissal of the solitary member of the Dilma Rousseff administration — the minister of Finance, Joaquim Levy — interested in carrying out the fiscal adjustment, only possible way to take the Brazilian economy out of the crisis in which it is mired.
“A Bridge to the Future” fulfills the role of setting an agenda not only for Mr. Temer, but also the country. It is a forgotten agenda, or better, forsaken. In the first three years in power, Mr. Lula, a pragmatist, accepted the legacy of Fernando Henrique Cardoso, strengthening the economic framework he found. In parallel, he made reforms that not even his predecessor dared to make — of the public sector’s social security, for example, matching the retirement rules for government servants to those of the private sector and forcing inactive workers to contribute to the social security.
Mr. Lula embraced an economic agenda that differed little from Mr. Cardoso’s. With the eruption of the “mensalão” scandal of Congress vote-buying in 2005, he weakened politically and began to turn his economic thinking. What marked the beginning of that process was the rejection, by then Chief of Staff Dilma Rousseff, of the proposal of zero deficit made by the economic ministers — Antonio Palocci (Finance) and Paulo Bernardo (Planning). Contrary to everything that Ms. Rousseff believes, the proposal was called “rudimentary.”
Two of the formulators of the PMDB document participated of those moments. Marcos Lisboa, now president of business school Insper, was secretary of Economic Policy of the Ministry of Finance between 2003 and 2006 and the main formulator of the microeconomic reforms of the Palocci tenure. Former minister Delfim Netto, together with economist Fábio Giambiagi, of the Brazilian Development Bank (BNDES), was one of the creators of the “zero deficit” project — the logic of the idea was that, having overcome the severe confidence crisis of 2002/2003, the country had the conditions to take the next step, thus eliminating the government deficit, problem that is in the origin of many ills of the economy (high interest rates, high debt, resilient inflation, low domestic savings, etc.).
The spectacular failure of the Rousseff administration’s economic policy and the president’s resistance to change paved the way for the return of agendas such as the one in “A Bridge to the Future.” Even not blaming Ms. Rousseff for the existing imbalances in the economy, the PMDB document, which also had the contribution of experts such as Paulo Rabello de Castro and José Márcio Camargo, makes clear that the current government goes in the opposite direction of confronting them.
Some examples are remarkable:
1) The document recommends the end of all earmarking and indexations that straitjacket the budget. In the government, Ms. Rousseff pegged the minimum wage’s adjustment to the variation of inflation plus GDP. She also rejects any proposal to untie the minimum wage from the minimum retirement payment. Furthermore, she never accepted establishing a legal limit for the government’s current expenditures. Ms. Roussef is also against ending the earmarking of funds for health and education spending, a Constitution rule that, in practice, stimulates inefficiency and doesn’t help solve the problems of the two sectors;
2) The PMDB proposes the return of oil exploration concessions in the pre-salt layer. Ms. Rousseff is the mentor of the sharing regime, which is in the origin of the downfall of Petrobras and is one seed, with the forced gigantism of the state-run oil producer, of the huge corruption scheme whose disclosure Brazilian society watches baffled. The requirement of national content, which is in the root of the sector’s inefficiency, is dear to the president;
3) The text recommends the full insertion of Brazil in global trade, with greater opening and signing of regional agreements (once multilateral ones are blocked at the WTO). Since she came to power, Ms. Rousseff raised import duties of several sectors and left the country out all relevant negotiations, creating a dangerous isolation that will cost us dearly (the trade re-routing is making Brazil lose ground in traditional markets). The PT government is also against negotiation of agreements without the presence of Argentina and, now, also Venezuela;
4) The document suggests that regulating agencies have independence and be depoliticized. Ms. Rousseff, like her predecessor, thinks that the agencies must be instrument of government policies and therefore can’t be autonomous. In her administration, most of the agencies work precariously, without even their director posts been filled;
5) The proposal talks of the reduction in the debt-to-GDP ratio and the achievement of the inflation target. In the Rousseff administration, this was never priority. The Extended Consumer Price Index (IPCA) was always above the 4.5% target, and this year is expected to reach 10%. As for the government debt, it deteriorates rapidly, something that already made the country lose its investment-grade rating.
“It is duty of the government and of society to keep inflation low, because not only public servants and welfare beneficiaries deserve the preservation of their purchasing power, but all Brazilians in general,” the document says, referring to the indexation of social security and assistance spending. “If to keep the purchasing power of those who receive income from the state we leave inflation out of control or too high, we are penalizing the vast majority of the population, which doesn’t have in its favor automatic indexation mechanisms.”
In the worst moments of the current political crisis, Mr. Temer talked to businesspeople in São Paulo. He has a conservative politician’s profile, but still those who talked with him had doubts about what he would do in case he took the presidency of the republic. Moreover, one of his allies in the corporate world — Paulo Skaf, president of Fiesp, the powerful trade group of the São Paulo state industry — makes an open campaign for the dismissal of the solitary member of the Dilma Rousseff administration — the minister of Finance, Joaquim Levy — interested in carrying out the fiscal adjustment, only possible way to take the Brazilian economy out of the crisis in which it is mired.
“A Bridge to the Future” fulfills the role of setting an agenda not only for Mr. Temer, but also the country. It is a forgotten agenda, or better, forsaken. In the first three years in power, Mr. Lula, a pragmatist, accepted the legacy of Fernando Henrique Cardoso, strengthening the economic framework he found. In parallel, he made reforms that not even his predecessor dared to make — of the public sector’s social security, for example, matching the retirement rules for government servants to those of the private sector and forcing inactive workers to contribute to the social security.
Mr. Lula embraced an economic agenda that differed little from Mr. Cardoso’s. With the eruption of the “mensalão” scandal of Congress vote-buying in 2005, he weakened politically and began to turn his economic thinking. What marked the beginning of that process was the rejection, by then Chief of Staff Dilma Rousseff, of the proposal of zero deficit made by the economic ministers — Antonio Palocci (Finance) and Paulo Bernardo (Planning). Contrary to everything that Ms. Rousseff believes, the proposal was called “rudimentary.”
Two of the formulators of the PMDB document participated of those moments. Marcos Lisboa, now president of business school Insper, was secretary of Economic Policy of the Ministry of Finance between 2003 and 2006 and the main formulator of the microeconomic reforms of the Palocci tenure. Former minister Delfim Netto, together with economist Fábio Giambiagi, of the Brazilian Development Bank (BNDES), was one of the creators of the “zero deficit” project — the logic of the idea was that, having overcome the severe confidence crisis of 2002/2003, the country had the conditions to take the next step, thus eliminating the government deficit, problem that is in the origin of many ills of the economy (high interest rates, high debt, resilient inflation, low domestic savings, etc.).
The spectacular failure of the Rousseff administration’s economic policy and the president’s resistance to change paved the way for the return of agendas such as the one in “A Bridge to the Future.” Even not blaming Ms. Rousseff for the existing imbalances in the economy, the PMDB document, which also had the contribution of experts such as Paulo Rabello de Castro and José Márcio Camargo, makes clear that the current government goes in the opposite direction of confronting them.
Some examples are remarkable:
1) The document recommends the end of all earmarking and indexations that straitjacket the budget. In the government, Ms. Rousseff pegged the minimum wage’s adjustment to the variation of inflation plus GDP. She also rejects any proposal to untie the minimum wage from the minimum retirement payment. Furthermore, she never accepted establishing a legal limit for the government’s current expenditures. Ms. Roussef is also against ending the earmarking of funds for health and education spending, a Constitution rule that, in practice, stimulates inefficiency and doesn’t help solve the problems of the two sectors;
2) The PMDB proposes the return of oil exploration concessions in the pre-salt layer. Ms. Rousseff is the mentor of the sharing regime, which is in the origin of the downfall of Petrobras and is one seed, with the forced gigantism of the state-run oil producer, of the huge corruption scheme whose disclosure Brazilian society watches baffled. The requirement of national content, which is in the root of the sector’s inefficiency, is dear to the president;
3) The text recommends the full insertion of Brazil in global trade, with greater opening and signing of regional agreements (once multilateral ones are blocked at the WTO). Since she came to power, Ms. Rousseff raised import duties of several sectors and left the country out all relevant negotiations, creating a dangerous isolation that will cost us dearly (the trade re-routing is making Brazil lose ground in traditional markets). The PT government is also against negotiation of agreements without the presence of Argentina and, now, also Venezuela;
4) The document suggests that regulating agencies have independence and be depoliticized. Ms. Rousseff, like her predecessor, thinks that the agencies must be instrument of government policies and therefore can’t be autonomous. In her administration, most of the agencies work precariously, without even their director posts been filled;
5) The proposal talks of the reduction in the debt-to-GDP ratio and the achievement of the inflation target. In the Rousseff administration, this was never priority. The Extended Consumer Price Index (IPCA) was always above the 4.5% target, and this year is expected to reach 10%. As for the government debt, it deteriorates rapidly, something that already made the country lose its investment-grade rating.
“It is duty of the government and of society to keep inflation low, because not only public servants and welfare beneficiaries deserve the preservation of their purchasing power, but all Brazilians in general,” the document says, referring to the indexation of social security and assistance spending. “If to keep the purchasing power of those who receive income from the state we leave inflation out of control or too high, we are penalizing the vast majority of the population, which doesn’t have in its favor automatic indexation mechanisms.”
Cristiano Romero valor.com.br
Waldemar Jezler
