the eternal debt

Image: Jessica Lewis


Public debt was used to finance a massive transfer of wealth from the native ruling class to international financial markets.

“Looks at, with a sphinx and fatal gaze,\ The West, future of the past” (Fernando Pessoa).

The analysis of the Brazilian public debt appears to be historically intertwined with the idea of ​​huge amounts borrowed from the always innocent and so “nice” bankers and other international institutions. It is curious how managers from the World Bank and the Inter-American Development Bank (IDB) treat the accounts of countries like Brazil and Argentina, always with the necessary care of a client who, being such a good payer, cripples its population, in order to maintain its status as an “excellent creditor”. ”, but even so, the logic of international and local analysts is always focused on the idea of ​​“deadbeat countries” and squeeze the people of these countries with eternal plans of fiscal rigidity, our last and most stupid one was even constitutionalized: the visceral EC 95/ 16.

The big banks, with the collaboration of imperialist governments, central banks and international organizations, have the capacity to establish rentier gains (with high interest rates, spreads or safe mechanisms for maintaining the rentier circuit via public debt) which, combined with the deterioration the terms of international trade, the growth of imports above exports and leads to a growing indebtedness. This means that public debt, together with neoliberal adjustment plans, becomes a weapon of domination and submission by peripheral countries, as they translate into increasing transfers and into a mechanism for extracting wealth from the South by the ruling classes of the North.

Contracts entered into between economic agents, although establishing unfavorable conditions and clauses that were extremely harmful to debtors, obeyed a class reason. The bourgeoisies of backward countries, the fractions that had risen to power, benefited from these loan contracts and withdrawals from public funds and, therefore, were associated with the interests of the international elites. Public debt was used to finance a gigantic transfer of wealth from the native ruling class to international financial markets present, requires a higher level of exploitation of labor, for the generation of a greater amount of surplus value to be transferred, via public debt, to the central bourgeoisies.

Four elements stand out in this public debt creditor-debtor relationship at the level of interaction between subordinated and central companies: (i) the public debt requires a portion of the tax fund to cover the payment of interest and amortization. Thus, even if the debt can be refinanced in its greatest significance, at some point compensation values ​​between the fiscal fund and the public deficit will be required; (ii) the mass of taxes in the economy is a specific portion of the wealth (surplus value) produced in that period; (iii) the Central Bank, through economic policy instruments, interferes in the purchase of securities on the secondary market, withdrawing securities (fictitious capital) from the economy and, on the other hand, injecting money from the State's fiscal reserve, thus recycling the public debt ; (iv) the cyclical conditions of capital require that the portion of national wealth (surplus value) used as income does not exceed a certain limit, which would cause the inability to refinance the state debt.

It is worth noting that the operating model that will allow the adoption of the public debt system as an instrument for transferring values ​​from the State to the financial segments, in the Brazilian case, has been established since the mid-1960s as part of the fiscal policies of the Military and Business Dictatorship. of 1964, being maintained since then, making the public debt the main mechanism for transferring wealth from Brazilian society to central capitalism. The Brazilian public debt system operates through a mechanism called “repurchase letter”, whereby the government sells the bonds with the commitment to buy them back after a period agreed between the parties. This mechanism guarantees the continuous recycling of bankers' fictitious capital, and the government ensures that the profitability of the securities always covers the cost of raising funds in the market.

This operational model practically eliminated the risk of the financial system and consolidated the interests around the public debt rollover. The public debt recycling and recomposition dynamics established from this model made the debt system a fundamental link for absorbing an ever-significant portion of the fiscal fund.

Financing for the repurchase of public securities in the secondary market constitutes the main form of state management of the mass of fictitious capital established in the economy, but imposes three serious consequences on us: (i) an ever-significant portion of the public fiscal fund will be destined to face the financial expenditures of the State, thus over the decades the problem of fiscal financing has been expressed in crises whose tone of deficit is always justified by new and growing austerities regarding primary expenditures, keeping untouched the condition of rolling over the public debt and of the permanent direction of recipes for this purpose; (ii) credit limitations at various levels, for resources destined for consumption and also for investments, something visible in bank spreads and high interest rates for reproductive investment of capital, a fact that explains the low capacity for macroeconomic growth ; (iii) finally, this mechanism integrates the other forms of value transfer to the central economies, with the transmission chain established from the financial system and the nexus between the large national and international groups and the integration of the established interbank portfolio .

This process of transferring wealth (surplus value) carried out through the market to the imperialist center, through public debt services, is offset internally by the increase in the intensity of work and exploitation of Brazilian workers. Available debt data that make it possible to empirically verify the amount of public funds leaving Latin America in the form of debt services, but mainly to empirically demonstrate that the “public debt system” constitutes a central economic form of the process of dependence and peripheral subordination, integrating the logic of transferring national incomes to the capitalist center.

This transfer of capital to the central economies translates into increased inequalities and poverty in the Latin American continent - which currently exposes the deepening of the concentrating character of the world process of capitalist accumulation - as well as its reflection on the Latin American periphery. americana, where most of the main ills of this process are pushed.

The Brazilian public debt and its permanent and automatic growth is linked to the refinancing mechanism itself, which we call fictitious capital recycling, that is, the process of buying and selling public securities in the secondary market for public securities (open market) and with the necessary use of monetary reserves (via tax revenue) to convert part of the fictitious values ​​into real values. The public debt not only recycles fictitious capital, but mainly enables the appropriation of national income by the segments that control the debt, favoring social impoverishment and establishing a pattern of low growth in the Brazilian economy.

The policy established during the dictatorial period (1974) was based on the placement of public securities with a posteriori monetary correction (ORTNs and LTNs), which enabled a double function: deficit financing and money market operations to control liquidity. It is worth reiterating that this security “repurchase” system became the basis for a model that practically eliminated risk from the financial system, guaranteeing continuous gains to the controllers of the Brazilian financial system. This model has been projected permanently since then, with some notable consequences: gross debt growth even in a non-deficit environment and; made debt a liquidity condition of the financial system, both canceling out any system risk and transferring net value from the national economy to financial sector patrons, whether domestic or foreign.

Two apparently contradictory phenomena developed during this period, the effects of which were felt with greater intensity in the Latin American periphery: (i) what is called neoliberalism imposes a brutal reduction in the primary (social) expenditures of the State – the so-called Minimum State is basically the Minimum Social State; and, (ii) neoliberalism conditions the public debt only to its rentier components, that is, the debt finances new bonds that transfer wealth (in the form of interest and part of the fiscal budget) to the debt controllers.

Thus, the dominant discourse revolves around the deficit logic of the State, which is related to the size of public spending. The reality, however, is that the budget portions destined to primary (social) expenses are increasingly reduced and the portions of expenses destined to financial expenses remain growing, regardless of macroeconomic cycles and regimes. This contradiction is, therefore, only apparent, since the gradual reduction of social policies within the fiscal budget is a condition for a growing mass of amounts transferred from the fiscal budget to financial expenditures, where the public debt notably stands out.

The transfer of income from the peripheral economies to the central ones via public debt makes it possible to change the capital gains in the center. The way in which this relationship develops involves some movements of capital: (i) first, a spurious system of public debt is established, conditioned not by public accounting rules and by the State tax system, whose essence would be to make debt against investments in public infrastructure; but debt is constituted to pay debt, in the bond buyback system that in central economies establishes the recycling of fictitious capital, however in peripheral economies it remunerates leftover bonds from national and international creditors, at a real net interest rate higher than other market bonds , including sovereign debt of other countries; (ii) it is conditioned by the growing regressive tax burden, that is, based on indirect taxation, it makes it possible for the mechanism of overexploitation of the workforce to manifest itself via the Fiscal State, so that workers' wages are reduced below the value of the workforce and this mass of wealth expropriated via taxes is converted into public debt service payments (interest and amortization); (iii) the peripheral economic regimes under the custody of the “PD toll” are always oscillating, with low capacity for growth and macroeconomic stability, in this sense there is a “vampirism” that bewilders the “host” and makes it impossible to consolidate any economic regularity or policy; (iv) finally, but centrally, income transfers become increasing, as the logic of maintaining central rentism requires increasing flows, which weakens the host and imposes new conditions for maintaining the system: more fiscal rigidity, increasing reduction of resources for social purposes; growing banking spreads. Logic such as EC 95/16 fit into this scenario.

The data of Economist Intelligence Unit (EIU),[I] they clearly show how the logic of transferring income via public debt works, which implies a radical difference between the public debt system at the center of capitalism in relation to peripheral capitalism. Thus, in the capitalist center, the public debt grows in order to manage the credit system, as shown by Trindade (2017), which implies growth in the total debt and in the volume of interest on proportional scales; in the periphery, the Public Debt System grows as a fundamental vector of income transfer, which implies growth in the total debt and interest rates on disproportionate scales.

The table below denotes the apparently contradictory behavior between debt sizes in relation to GDP and the volume of interest (in percentage terms of GDP) transferred as income. A very specific case refers to Brazil, its status as a financialized peripheral economy defines a different level of the interest/debt ratio, only partially followed by the economies of Argentina and Mexico. The notion of apparent contradiction is expressed especially in the comparison between the US and Brazil, in the case of the US the debt/GDP ratio is above 60%, but the interest/GDP ratio in the US case is below 1,5%, much lower of the Brazilian case.

Weight of Debt Interest by Selected Countries (2010, 2011 and 2015)


Source: BBC News Brazil. Accessible at:

Interventions by multilateral organizations are always aimed at guaranteeing new transfers of wealth from peripheral countries to central countries, via public debt. Thus, the central concern of the IMF, the World Bank and the other international financial institutions is to guarantee the maximum of the fiscal budget with financial expenditures, even if this leads to an increasingly significant reduction of the so-called primary expenditures. This was the meaning of Constitutional Amendment 95/16, where the fiscal adjustment packages do not have a comma referring to interest rate control or a rational policy in this regard. The change in political and social power in Brazil will have to modify this logic, otherwise “everything will continue as before in the Abrantes barracks”. We'll see!

*Jose Raimundo Trinidad He is a professor at the Institute of Applied Social Sciences at UFPA. Author, among other books, of Agenda of debates and theoretical challenges: the trajectory of dependence (Pakatatu).



[I] Accessible at:




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