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NOTE: Taking care of bills is taking care of people

In 2020, the yr of the epidemic, Brazil may have the primary public sector deficit of R$700 billion (10% of GDP). In that yr, dangerous outcomes have been anticipated within the subsequent two years, however they didn’t occur.

The sturdy restoration in incomes because of the mixture of rising commodity costs, inflation and GDP progress – along with controlling labor prices – led us to 2 years of the primary steadiness (2021 and 2022) and, this yr, to the primary constructive outcome. for the Central Government since 2013.

Now, most economists are already predicting the return of the primary {dollars} for the Central Government and the general public sector in 2023, citing the rising public debt as a deficit. of GDP.

Among the explanations for the return of the primary {dollars} is the lower in earnings and the fixed enhance in bills, we will result in the start of the federal government with a low of 0.5%, 1 % or extra of GDP.

Can this be averted? Yes.

Better monetary outcomes subsequent yr and past will be achieved by reversing some, if not all, of the measures taken in 2022.

First of all: provided that authorities revenues are anticipated to say no subsequent yr, the rise in spending is unlikely to translate into actual progress. However, it is troublesome to return Auxílio Brasil to R$400.

From 2003 to 2019, the Bolsa Família/Auxílio Brasil didn’t exceed R $50 billion (0.5% of GDP). Now, it is going to triple to just about R$150 billion (1.5% of GDP), benefiting 21 million households.

Instead, we have to discover a supply of earnings (an actual enhance in earnings or a minimize in spending) to pay this invoice with out rising the first deficit and debt.

Second: Some of this yr’s applications – fuel help, truck driver help, taxi driver help, and many others. – will finish this yr and aren’t anticipated to be renewed. These annual applications are equal to 0.2 % of the GDP of the expenditure that can be minimize within the earlier yr, as a result of there are not any unexpected circumstances that may justify the continuation of these applications, and they aren’t sure This emergency has occurred in 2022. The minimize of these applications. The applications don’t open up funding alternatives for brand new spending. Eliminating these applications will solely scale back the scale of the earnings adjustment.

Third: the discount of the IPI for industrial merchandise and the discount to “zero” of federal taxes (PIS/Cofins) for gas ought to – each – finish this yr. The discount of these taxes didn’t hurt the 2022 accounts as a result of the central authorities will obtain greater than 1% of GDP from the very excessive earnings from the distributions and distribution of Eletrobras. But these authorities tax cuts mustn’t proceed, as a result of of the loss of income for the subsequent yr and the necessity for a fiscal adjustment of at the least 2.5 of the GDP for the next years lately. Reversing these two measures will return 0.7% of GDP to the central authorities by 2023.

If there is no want to extend the IPI, the subsequent authorities should discover a new supply of earnings. It’s non-compulsory.

Over the previous 20 years, for instance, particular tax measures have proliferated, and lots of of these measures must be evaluated for social justice and monetary want. What is the vary of double earnings tax aid for retirees or pensioners aged 65 and over, regardless of earnings? This profit is price greater than R$10 billion per yr. Why is the total deduction of personal well being bills allowed in a rustic with a public, common and free well being care system? Why does a authorized entity (non-employee firm) pay solely 14.5% of its earnings as tax beneath the capital good points technique when the worker pays the decrease fee of 27.5%?

Considering the quantity of public debt right now and the curiosity charged on it – and assuming that the economic system will develop at 2.5% per yr over the past three years of the administration – credit score progress will solely cease on the finish of this new program. Lula’s authorities if (if solely) it plans spending cuts or tax will increase that usher in at the least R$250 billion (2.5% of GDP) to the Treasury every year.

Some could say that this sacrifice is too nice – nevertheless it is good to suppose of alternative ways. Failure to regulate will maintain the Selic excessive for a very long time, stressing small enterprise and indebted residents, rising inflation, and decreasing the buying energy of the poor inhabitants.

On the opposite hand, the change in confidence – with a view to the economic system on the finish of the interval – creates a virtuous circle, the arrogance of buyers drops beneath rates of interest and inflation, which pulls personal sector funding, extra work and earnings for staff – essential within the problem to scale back poverty.

The starting of the federal government is the correct time to current the monetary reform technique. This has been completed earlier than, together with President Lula. History is full of profitable examples.

In 1999, in the course of the second administration of the FHC, along with rising varied taxes and contributions, the federal government additionally created the CPMF tax at a fee of 0.38%. The CPMF was an alarming means of assortment, however the financial group on the time defended it as needed for the federal government to ship on the preliminary goal agreed by the IMF. This technique is not good in right now’s situations in Brazil, with a tax burden of 34% of GDP, which is above the typical of 23% in Latin America.

In 2003, throughout Lula’s first authorities, the federal authorities will minimize public funding in half and enhance the PIS/Cofins fee within the context of the tax reform to gather extra and launch the deliberate enhance for the primary steadiness. Cutting public funding is a troublesome measure, together with main restructuring and reform of the general public sector pension, which has ended the trade-off between the prices of the highly effective central authorities and the unemployment, and establishing social safety contributions for retired civil servants. .

In 2015, Paulo Hartung The Holy Spirit takes care of the motto that names this text, and its simplicity and fact can’t be disputed: “The safety of accounts is the safety of people”. According to Hartung, Espírito Santo is the one state that acquired an “A” grade from the National Treasury, the best seal of fiscal duty.

In 2016 and 2017, within the authorities of Temer, along with the approval of the spending finances, many applications have been lowered – Minha Casa Minha Vida, FIES, BNDES funding – and gas taxes have been elevated to realize the primary program in 2017. common? Yes, nevertheless it is needed to scale back the primary massive deficit of 2.5% of GDP that occurred within the earlier authorities within the context of recession – two years in a row of GDP decline (2015 -16) and 4 years in a row (2014-17). ) of the lower in funding value.

In 2019, the Bolsonaro authorities handed pension reform and froze the true worth of the minimal wage, a measure that helped management pension spending, which accounts for greater than half of central authorities spending. In addition, public wages and salaries for civil servants have been lowered for 3 years, and labor prices have been lowered by 0.8 % of GDP in 4 years.

For those that suppose that the financial reform wanted right now is unacceptable, it is additionally price taking a look at what is taking place within the United Kingdom. There, the brand new prime minister is attempting to create a finances that can enable him to cease the expansion of public debt at the start of subsequent yr. Here in Brazil, we’re speaking about reaching this in 4 years – an extended interval, however one through which the brand new authorities can be dedicated.

No finances regulation can stop the federal government from making robust choices – each on the spending and tax aspect. It is higher to introduce these measures early to make sure decrease rates of interest, decrease inflation and stronger GDP progress within the coming years.

The finest technique to shield people is to confess that typically the medication is bitter, however the medication is worse. The monetary reform should be completed to not favor Faria Lima, however to remodel the economic system into what Brazil does.

Mansueto Almeida is chief economist at BTG Pactual. He is the Secretary of Finance and Secretary for Economic Monitoring of the Ministry of Finance.

Mansueto Almeida

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