Page 8 - MONTT LATIN AMERICAN MAGAZINE, OCTUBRE 2021 (English)

Brazil: Abandons its Traditional
Austerity
Contradicting his own words upon coming to power, the Minister of Economy, Paulo Guedes, abandoned control of fiscal spending. Exhausted
by rising inflation and debts to pay court orders, the Secretary of State now expands his list of maneuvers and is heavily criticized by investors.
Interview to the Economy Minister, Paulo Guedes
Brazil’s financial market took a nosedive after Economy Minister Paulo Guedes announced his decision to put aside a plan to control fiscal spending, a sacred thesis for investors.
Thus, the São Paulo Stock Exchange closed with a fall of 2,94 percent – the worst performance in 11 months – after the Secretary of State opened a debate in Brazil about his intention to exceed the debt ceiling planned for finance the aid program Auxilio Brazil, with a view to the reelection of President Bolsonaro in 2022.
Four secretaries of the Ministry of Economy, including Bruno Funchal, responsible for the special portfolio of the Treasury and Budgets, resigned a day after the announcement.
The social spending ceiling is a consensus that has guided the country in the last five years, since the last of the Workers’ Party in power. The minister’s announcement had a negative impact on the country’s main economic indicators. The São Paulo Stock Exchange reopened lower again. For its part, the dollar reached 5,70 reaiss due to the possibility that the Bolsonaro government does not comply with the commitment it has made not to touch the spending ceiling.
The Minister’s idea is to exceed that threshold to pay debts, including those known as precatório -which must be canceled by court decision- and which expire next year, and the new social program aimed at families in vulnerable situations. The matter had been the subject of debate in Brazil for several days. Investor fear was confirmed and caused major reversals in the markets.
Fear of an Inflationary Spiral
There is concern that Brazil will enter a vicious circle in which the money injected into the economy will increase the demand for consumer goods and, consequently, will rise inflation. Through
the Auxilio Brazil Program, the Government intends to pay about USD $ 70 per family, more than the current Bolsa Familia social aid project; the business sector is not ready to meet this growth in demand. In practice, the Minister contradicts the speech that he himself defended from the beginning of the Government and with which he won the unrestricted support of the market.
Exhausted by rising inflation and hesitation to pay court orders, the minister is now expanding his list of moves criticized by investors increasingly skeptical that he will be able to put the country on the path to a sustainable recovery.
The authority also lost credibility and is already in the public eye for keeping his money abroad, as the Pandora Papers journalistic investigation showed, while Brazilians are exposed to economic instability.The outcome of these policies will be measured in the 2022 presidential elections.
Senate Impeachment
On the other hand, the Senate Commission accused President Bolsonaro of crimes against Humanity, which mainly focus on the government’s behaviour with respect to the indigenous groups that it excluded from its vaccination plan, for which the Commission accuses him of inhumane actions, persecution and extermination. In a thousand-page document read before the Senate, it was stated that: “All the evidence reveals that the Chief Executive had numerous behaviours that aggravated the dire consequences of covid-19 in our population,” the investigation reads. One study indicated that the President of Brazil led an “institutional strategy for the spread of the virus.”
p8 Montt Latin American Magazine