The deception of Paulo Guedes

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The cosmetic measures announced by the government will not prevent the Brazilian economy from collapsing, in a scenario where millions of Brazilians can be expected to fall into poverty. The result will be social chaos.

By Jose Luis Oreiro*

On the night of March 16, his majesty, the tsar of the Brazilian economy, announced his plan to face the coronavirus crisis. His presentation of an incredible six, that's right, six slides (where the first is the cover) already shows the degree of unpreparedness of the biggest slider in the history of the Republic. On the first slide we see “structuring measures” which include “federative pact”, “PL da Eletrobrás” and “Plano Mansueto”, whatever that means.

I was particularly interested in a bill with the aim of selling Eletrobrás at a time when the stock exchanges in Brazil and around the world have accumulated a drop of more than 40% in the last two months. It can only be a plan to sell, in the basin of souls, what's left of the heritage of the Brazilian people, who knows what interests. Any minimally responsible manager would say that this is not the right time to dispose of assets, but the economy czar wants to take advantage of this moment to privatize a company that is strategic for national interests (Expecting what from a person who says he loves the United States?).

The following slides read “up to 147,3 billion in emergency measures”. When one reads in detail what is being proposed by the Ministry of Economy, it is clear that the proposed measures are limited to anticipations of expenses that would be carried out throughout 2020, but that will be anticipated for the first half of 2020. According to a spokesperson for Senator José Serra, the Guedes package provides for an increase in budget spending of just R$ 3 billion throughout 2020. To have an idea of ​​amounts, it is like trying to stop a bullet train by firing a bullet. revolver.

While Minister Guedes keeps fooling Brazilian society with cosmetic measures, developed countries are setting up colossal programs to increase public spending, among which the French program to cancel rent, electricity and water bills (which should be paid by the state) or the proposal of Senator Mitt Rommey of the US Republican Party to give US$ 1.000 for every American adult. The huge contrast between Paulo Guedes' bullshit and the radical measures being put into practice by developed countries shows the degree of unpreparedness and amateurism of the Minister of Economy.

Rommey's proposal could and should be adopted in Brazil. Restrictive measures on the movement of people and holding events will heavily affect informal and self-employed workers who will be, overnight, deprived of their income and will not have access to the social benefits provided to formal workers such as unemployment insurance, FGTS and etc. A possible alternative – as suggested by the PSDB, PT and PSOL economic advisors – would be the implementation of an Emergency Universal Income Program, in which every Brazilian adult, without formal employment and aged between 14 and 65 years, would be entitled to withdraw an amount equivalent to one minimum wage per month, for three months, at any Caixa Econômica Federal, Banco do Brasil or lottery agencies, presenting only your identity and CPF.

A program of this scope could cost the equivalent of R$300 billion in one year. Considering a value of 1.5 for the government spending multiplier, the increase in GDP generated by this program would be R$450 billion. As the public sector as a whole collects around 33% of income in the form of taxes and contributions, the additional collection (relative to the scenario in which nothing is done) would be R$ 150 billion, so that the primary deficit would increase, coeteris paribus, at BRL 150 billion or 2% of GDP. Considering the severity of the crisis that Brazil will face – as other countries are already facing – it is a cheap program with very wide coverage.

The alternative to this program is to continue with Paulo Guedes' bullshit and wait for the Brazilian economy to collapse, without having a social safety net capable of preventing millions of Brazilians, our brothers, from falling into absolute poverty. The result will be social chaos, supermarket looting and thousands of deaths. The choice is quite clear. It is up to the Brazilian people to carry it out.

*José Luis Oreiro is professor of economics at UnB

Article originally published on the blog José Luis Oreiro Economy, Opinion and Current Affairs.

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