Traps for Lula

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By JEAN MARC VON DER WEID*

The economy é the key point of the trap set for the Lula government

The economy

There is a consensus among economists that the cursed legacy of Jair Bolsonaro's government is a giant challenge in itself. The executive is horribly fragile in all his instruments of action. There is a lack of cadres and equipment everywhere, wages in vital sectors are overcompressed, control bodies are in shambles. Just to recover the operational capacity, which was lacking even in its best moments, it will be necessary to invest a lot.

On the other hand, public utility infrastructure is also scrapped, with hundreds of thousands of kilometers of roads in precarious conditions, thousands of works stopped and/or poorly designed, investments in power generation and sanitation paralyzed. This is just a small sample. The list is long, and overcoming attrition and delays is going to be expensive.

The economy, in general, is recovering slowly and in a debatable sense, from a social and environmental point of view. Countless factories, large, medium and small, were closed and the financial health of companies was shaken, as seen by the scandal of Lojas Americanas, awarded as a management model. Industry's share of the economy has been falling for some time, but it took a stronger hit in the last 10 years.

Precarious services are growing, without professional qualification and with low remuneration. The civil construction sector has been recovering some momentum recently, but not by chance, it has favored the richest sector. The gigantic housing deficit is far from being resolved and a new Minha Casa, Minha Vida will have to be very turbocharged, in addition to having to adapt to a logic of sustainability in the urban design that was not the keynote of its predecessor.

What continues to be profitable and growing is extractivism and agribusiness. In the first, illegal mining and logging activities will have to be fought (see below) and this will represent a brake on this criminal economy. But the most important activity, legal mining, could also suffer inhibitions, if the government does what it has to do and forces companies to take care of the environmental risks of their activities. Neither Lula nor Dilma Rousseff tried to put the brakes on the unbridled expansion of mines of all kinds during their governments, with lax legislation and even lax surveillance. They are lucky that the disasters occurred during the governments of Michel Temer and Jair Bolsonaro, but they are partly to blame.

As a sector identified as the most dynamic in our economy in the last 30 years, agribusiness is a separate chapter that will be discussed further in another article in this series. At this moment, it is worth remembering that the international conditions that allowed the unprecedented expansion of this sector should not be maintained in the coming years. Production costs, which have been on the rise for some time, tend to accelerate, while importers' restrictions on products arising from deforestation or the use of transgenics and pesticides tend to increase. The brake on the economies of importing countries, China and Europe in the first place, should also have an inhibiting effect on the maintenance of the remarkable expansion of our agribusiness. Add to this the increase in the Brazil cost, particularly with regard to land transport and the operation of ports, so that we can say that we will not have a repetition of the recent dynamism in this sector.

To summarize, we have an economy that is moving sideways, with unresolved structural problems, with a low level of investment and an international situation that tends to remain on the back burner or in a very slow recovery in the coming years.

How does the Lula government intend to boost the economy to expand and improve the quality of jobs, increase workers' wages and income? How will living conditions and consumption levels improve? How will it face the brutal inequality in income distribution that today inhibits the expansion of the internal market?

The general ideas advanced above all by the president of the BNDES, Aluísio Mercadante, point to the financing of small and medium-sized companies, which is a good idea to increase the demand for manpower, today in unemployment and underemployment, since they are the ones that offer more vacancies per real invested. It is an advance compared to the programs of the “national champions” of previous PT governments. Investing in the green economy is also a good principle, but it is necessary to know what this means concretely. Are we going to put resources into replacing the use of fossil fuels? In the elimination of energy losses of all kinds? In reducing the use of chemical fertilizers and pesticides in food production? There is no clear government plan, neither in the electoral campaign, nor in the transition, nor until now.

The government is still focused on finding the means to invest, without defining exactly in what. In my view, this is a mistake because it means discussing tax reform only in terms of increasing the executive's clout and investment capacity. As I wrote before, this is going to be a crucial debate and it is being held without the argument of the future use of the new resources that the government will seek. There is an emphasis on financing social programs and this is an important objective that must be made very clear to all taxpayers.

There is also reference to the issue of redistributive justice and this is not so clear to the general public. But if we allow the reform debate to be centered only on the rationalization of countless taxes, we will be pleasing companies. However, they will not stop roaring if there is any movement to increase taxes in this rationalization. This is the reform that Lira wants to put to the vote. What he doesn't want is to see higher rates for the richest, in particular for rentiers in the financial economy. What makes it difficult to carry out a true and necessary tax reform, relieving the poorest and demanding much more from the richest, is that parliamentarians are part of the upper floor block and would have to pay more than they currently disburse. It's going to take a lot of pressure on Congress.

If the government wants to mobilize public opinion to support tax reform, it will have to show the importance of resources to touch the economy and set up a program where the common man/woman can find a concrete answer to their daily concerns. In other words, we need a program that is clearly aimed at meeting the needs of the people in terms of food, housing, education, health, employment, sanitation, access to water, transportation, energy, leisure and culture.

The ongoing discussion about the interest rate is poorly explained. Lowering the Selic is a necessity accepted by almost everyone, even the banking sector, albeit lip service. But, in the past, this did not have any major effect on the interest rates paid by people, on credit cards, on overdrafts (in extinction), on credit cards at stores. With 70% of the population in arrears in paying their bills and a third of them in default, it is these excruciating interest rates that are of interest and not the economic abstraction (for the general public) of the Selic.

Amnestying the debts of the poorest is a palliative measure, albeit a necessary one. Without a fundamental banking reform that lowers interest rates for consumers, re-indebtedness will happen gradually. The arguments of the banks in defense of their stratospheric interest rates, the highest in the world, are unsustainable. It would be a spread to cover default risks, but it causes its own risk. Incidentally, if this argument holds, banks should reduce payroll loan rates to half a percent per month, since the risk is zero.

The Selic rate is “justified” as it is an inflation control mechanism. If we had an economy with strong demand pressure, this could even be the case, although, taken in isolation, this control mechanism has a perverse effect of punishing the poorest, and, in extreme cases (I believe it is ours) more than one Moderate inflation would. But we are not facing an inflation of demand, with a stagnant economy, a debt-ridden population and compressed wages. In the case of food, at least, we clearly have cost inflation and a continuous increase in prices due to the dollarization of agribusiness production and the rise in food prices. commodities the world.

For anyone who thinks the nightmare of food inflation is over with the drop in February's indexes, it's best to take a closer look at the bigger picture. The big drops in food prices were concentrated in meat, in particular beef. This is a conjunctural effect of the temporary suspension of exports to China, as a result of health issues. On the other hand, the fact that slaughterhouses and breeders turned, for contingent reasons, to the internal market, shows that it is perfectly possible to adopt policies aimed at internal supply without creating a crisis among these companies. It is obvious that they make more profits from exports, but they are perfectly viable selling to the domestic consumer.

In the midst of so many questions about the present and future of the economy, the debate about the “autonomy” of the Central Bank is almost obscene. To begin with, the Central Bank was declared autonomous by law with a single objective: to take control of the monetary economy out of the hands of the executive. Alright, they took it. And who controls the Central Bank? A body of employees, mostly historically linked to the financial sector. In other words, autonomy in relation to the executive branch is exchanged for subordination to a sector of the economy, banks and finance companies.

The bureaucrats on duty are faithful to their origins and interests. In view of the opposition of the current president of the Central Bank, both to the electoral pressures of Jair Bolsonaro last year and those of Lula this year. The banks thank you and rentiers too. In parentheses, I know that not every investor in government papers is a heartless sucker of the people's savings. The vast majority are small investors seeking to protect their meager savings.

But the bulk of government bond holders are large banks and finance companies. This mechanism of financing the State through government bonds has nothing intrinsically wrong with it. The complicating factor is when it starts to be used as a currency wiper under the pretext of controlling inflation, under any circumstances, whatever the diagnosis of the nature of this inflation.

The autonomy of the Central Bank is an aberration. The economy's management mechanisms cannot be sliced ​​between different agents that may be in contradiction, as is the case here and now. It is a Brazilian jabuticaba (pleonasm), except for exceptions here and there that I would like to study, as in the case of Chile.

To summarize, the economy is the key point of the trap set for the Lula government. It is the typical riddle of the Sphinx: “decipher me or I will devour you”. If Lula fails to revive the economy and, even more so, if he fails to revive it in the right direction, he will sink in the government, no matter how much he implements good social programs, no matter how much he restructures the State dilapidated by Jair Bolsonaro, no matter how defend democratic institutions, however much it protects the environment, culture, women, blacks and LGBTQIA+.

And to do that, Lula only depends, for now, on a hostile congress, on a narrow-minded ruling class and on a press that lives in the past, with the tics of neoliberalism abandoned even by its patrons, the Americans. She has seen Joe Biden's budget, with trillions of state investment to recover the economy. If the Tupiniquim version of the minimal state prevailed, the USA would be bankrupt.

The environmental issue

Although the agreement between Lula and Marina Silva placed the environmental issue as a “transversal theme”, running through all government decisions, both the convictions of the PT leaders and those of Lula himself, not to mention minor actors from other parties, point out for the repetition of the problems of the first government. This principle of transversality had already been enunciated in 2003 by Marina Silva and was ignored while she was in government and abandoned, without remorse, by the ministers who succeeded her.

Decisions ranging from importing used tires to investing in the Belo Monte dam, passing through the transposition of the São Francisco River and the release of transgenic products were taken by tractoring the minister, who began to digest increasingly larger and more disgusting frogs. Will it be different? And why would it be? The convictions of both are the same and the economic and political pressures as well. The exception seems to be placed on the theme of deforestation and fires, but this had already been the point where Marina Silva got more support in her experience in the previous government. Carlos Minc maintained Marina Silva's stance, but under Dilma Rousseff's government it was weakened, with the president's support for the new Forest Code.

The issue of global warming is being treated, in this government, strictly in relation to deforestation. Lula expanded the scope of the issue when speaking in Sharm-el-Sheik, proposing zero deforestation in all biomes. I think he let himself be carried away by the triumphant atmosphere of his presence at the conference, as the most likely thing is that everything will be centered on the Amazon. It is the focus of international attention and first world resources to support this objective are, until now, being foreseen only for this biome.

Zero deforestation, even if only in the Amazon, would already be a huge step forward, but we must remember that there is an important legal difference to be considered. The Forest Code allows farmers and breeders, from large agribusiness entrepreneurs to small family producers and Agrarian Reform settlers, to deforest areas of their property, within certain parameters. The action against illegal deforestation and burning obviously has legal support, but they are centered, above all, in derelict areas or in indigenous reserves or natural parks.

Controlling deforestation will not be easy, but legal instruments are available. It will be necessary to strengthen IBAMA and ICMBio a lot and guarantee military support (federal police, armed forces) for the repression of illegal immigrants. By the way, there will not be a significant collaboration of the military police of the states in the region. Among Bolsonarist governors or right-wing leaders there is no enthusiasm for this endeavor.

The same reasoning applies to the control of the mines. It will be easier to stifle these ventures through control of the gold market than through direct action on the mining sites. The ongoing operation in Yanomami territory shows the size of the problem, with thousands of faiscadores employed by criminal cartel companies in Rio de Janeiro and São Paulo being expelled from the area. militarily. And, in some cases, resisting the bullet. The case of this territory is just the tip of the mining iceberg and the tactic of crime bosses is to retreat to resume the work later. Surveillance will have to be continuous and, to suffocate these mines, control of rivers and airspace (read navy and air force) will be essential.

If the fight against deforestation in the Amazon is taken seriously by the government, this type of operation applied in the Yanomami territory will have to be expanded and permanent. And the political price will be great. As I already pointed out in another article, illegal mining now has a congressional bench and the collaboration of governors involved in this predatory economy. It's a small group, I admit, but it has important allies among the ruralists. The latter clearly perceive that the attack on gold miners points to controls on illegal deforestation that harm the interests of agribusiness.

The ruralist caucus has an agenda aimed at expanding agribusiness access to land that is, theoretically, preserved today and is ready to enter with bills that favor them even more than at present. The alliance with the garimpo will be based on common interests. The ruralist caucus directly includes more than half of the Chamber and can grow even more with political alliances with other lobbies. The Congressional trap has multiple interests that can combine, as in the case of deforestation, or not, as in the case of legislation on weapons.

The environmental issue is going through another clash with agribusiness and its representation in Congress, the ruralist caucus. Reducing the use of pesticides and transgenics is an agenda for environmentalists and public health advocates. Agribusiness, on the other hand, wants to speed up the release of new pesticides and transgenics, even limiting the role of ANVISA and handing over the processes to MAPA. They want more than the thousands of pesticides released by the government of the madman, many of them banned in the countries where they are produced. The bills on the agenda run in the direction of a 'general release', without restrictions. The same goes for transgenics. Agribusiness does not seem to realize that resistance to exports of Brazilian agricultural commodities in Europe is getting worse. How will the Brazilian negotiators of the agreement with the European Union react when these restrictive clauses come to light? What will be the position of the Lula government? Are you going to defend polluting agribusiness exports?

Even in the debate on tax reform, there is a dispute with agribusiness. This sector benefits from all kinds of subsidies, from the elimination of taxes on inputs to reductions or elimination of taxes on products, amnesty of debts on FUNRURAL never paid by companies and the payment of symbolic amounts in the Rural Territorial Tax. Not to mention the favored interest rates on bank loans. This all adds up to a few tens of billions a year and tax reform is going to have to eliminate this privilege.

The environmental issue, more precisely global warming, goes through a gradual reduction to the elimination of the use of fossil fuels. In the Paris agreements, the governments set the goal of reaching 2050 with a consumption of fossil fuels at the level of, if I'm not mistaken, the year 2000. This goal, considered very insufficient by scientists and environmentalists, is now seen as completely outdated and the year 2030 is being proposed as the imposing beginning of the era of zero carbon, in terms of the balance of emissions and absorptions. The pressure to reduce the use of fossil fuels will grow a lot every year.

And what is the Lula government debating? The proposal on the agenda is to take back control of Petrobras (positive part) to abandon parity with international prices with the clear intention of keeping gasoline and diesel prices low. Everyone knows that reducing the use of any product has to do with rising prices, but the new government, just like the previous one, does not want to pay the political price of discouraging the use of fossil fuels.

But if, by chance or due to internal and external pressure, the government tries to draw up a policy to reduce petroleum derivatives (not to mention coal, which continues to be used in Brazil, including with projects for more power generation centers) and its substitution for clean energy, the clash with Congress, once again, will be hard. And with truck drivers, Bolsonarists or not. And taxi drivers, app drivers, bus companies and car owners.

Facing the issue of eliminating the use of fossil fuels is complex and requires public opinion preparation and ambitious policies to promote other forms of energy and replacement strategies. We cannot stop promoting the use of LED lamps or electric cars or solar panels on the roofs of the homes of the better off. Or in regulating the carburetion of combustion engines so as not to release so much smoke into the air. If we want (and, whether we want to or not, we will have to) to control the emission of greenhouse gases, we have to start by treating the subject in an integrated way and proposing policies that respond to the economic and social complexity of the problem.

Still on the Brazilian contribution to global warming, we note that greenhouse gas emissions directly generated by agribusiness operations are the second most important factor in our liabilities, after deforestation and fires (also caused by agribusiness). These are gases from the application of nitrogenous fertilizers, from rice fields, from cattle (burping and flatulence) and from the manure produced by cattle, chickens and pigs. There are also CO2 emissions, not as significant as the previous ones, from the use of agricultural machinery and the transport of crops by truck.

Changing this production model will not be easy. There is, however, at least one short-term window of opportunity. The government should look at the growing difficulties in buying fertilizers on the international market and propose a policy to replace chemicals with organic ones. These could be mass produced with a policy of composting organic waste and sewage sludge. It would be a policywin-win”, that is, only with advantages, as it would take a leap forward in the sanitary issue and would largely solve the problem of the cost of fertilization, and still adopting a sustainable process. And, of course, reducing the emission of N2O.

All of this cannot be gained from a policy of producing organic fertilizer alone. Agribusiness does not like to change its standards, even the worst and even the most expensive and risky ones. They will argue that the cost of moving tons of organic fertilizer is much higher than spreading hundreds of kilos of chemical fertilizers per hectare. But it's nothing a good subsidy (in this case, justifiable) can't overcome.

There is a plethora of other themes in the environmental area, of lesser impact, but also important. Among others, the question of pollution by plastics and detergent foam that are suffocating rivers, lakes and the coastline. Or the disposal of used tires. Or the existence of dumps. But space is short and I dealt with the most acute and comprehensive environmental issues, aiming at the problems that the government will have to face in Congress and in society.

*Jean Marc von der Weid is a former president of the UNE (1969-71). Founder of the non-governmental organization Family Agriculture and Agroecology (ASTA).

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