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By BENICIO VIERO SCHMIDT*

Commentary on recent events

Let's start with the debate about "the hole in the ceiling". The legislation that came from the Michel Temer government, sponsored by the MDB in the “A bridge to the future” project, established a ceiling for public spending, including investments there, equal to the previous year's inflation plus the current year's availability. Now, before the pandemic, the ceiling for spending was estimated at 180 billion reais. We have already reached 800 billion. The ceiling was breached for exceptional reasons, of course, but the question remains whether the Brazilian State should not maintain an investment capacity for the recovery of employment and income. Even more so when one takes into account that new investments can increase GDP growth and reduce the public debt by increasing State revenue.

The great arguments of the reigning orthodoxy, with Paulo Guedes at the Ministry of Economy, are that, first, there is the possibility of capital flight if the ceiling is breached. The answer to this would be that capital flight has been taking place since 2016, in amounts above the historical average in Brazil. So there is already capital flight. Second, that breaching the ceiling would lead to cost inflation. What we are currently seeing with the ceiling hole of 800 billion reais is that inflation is practically non-existent, and we have signs of deflation in key sectors. So another insufficient argument.

The third argument is that an increase in public debt would lead to an increase in interest rates. Now, the public debt has increased from 65% of GDP to around 80% of GDP currently and we have not had an increase in interest rates, on the contrary, we are at the lowest historical average of interest rates in Brazil. And, finally, that the hole in the ceiling would lead the country to a recession. Well, officially we've been in a recession for at least the last year, at least.

It is a worldwide debate on the current role of the State. The European economic community has launched a collective program of 750 billion euros to finance the reactivation of the economy in the countries of the bloc. The United States has been doing the same thing since 2008, when it was the epicenter of the crisis, as well as Japan. And in these countries there is no inflation, there is a brutal increase in the debt without inflation and with very low interest rates – in the case of Japan, negative interest rates.

Liberal arguments are easily refuted in the field of economic debate. It remains to be seen which government operation will be carried out. The situation makes a prediction possible: Paulo Guedes' days seem to be numbered. The government, through Jair Bolsonaro, Minister Rogério Marinho and other ministers, apparently wants a resumption of public investment of around 30 billion reais. The budget piece that will be sent to Congress preliminarily foresees only 10 billion reais. Therefore, the risk is taken by Paulo Guedes and his theses of fiscal austerity.

The second highlight is that, contrary to the injunction by STF Minister Ricardo Lewandowski years ago, and a concept that comes from the Federal Constitution, the government is slicing up state-owned companies to sell them on the private market. This is the case recently of the sale by Eletrobrás of the large wind farm project in Rio Grande do Sul. It is estimated that Eletrobrás spent 3,1 billion reais to set up this park and sold it for only 500 million reais. Slicing up state-owned companies has become a strategy to sell them at a huge loss from an operational point of view.

The budget piece that will be sent to Congress in the next few days, predicts, for the first time in ten years, that defense will have greater investments than education. Defense spending, including salaries, will be $5.8 billion, more than the total for the Ministry of Education. This is the first time this has happened in the last 10 years. The fact is that this reminds us of the strategic importance of the political role of the Armed Forces within the current government. It should be noted that in the Ministry of Education, 71% of the budget will be dedicated to paying the payroll. As for defense, this rises to 91%, that is, from the point of view of economic efficiency, the MEC budget is more efficient than the defense budget, which keeps its staff super well paid.

The national survey that announces Jair M. Bolsonaro with the greatest support since he took office indicates the presence of many factors, obviously, but it is clear from the data that the greatest support comes from the informal sector of the economy, in particular informal workers and the unemployed . This means that, when the emergency aid program ends, or the strategic aid that has been offered in recent months is not redefined, support for the government tends to be resized.

We are on the eve of municipal elections. For these elections, as for all others, there is a party fund, which is allocated to the political parties each year, and an electoral fund, which is dedicated to each particular election. This year, the electoral fund goes to more than 1 billion reais and the parties that make up the largest number of deputies are the ones that will have the largest slices of these resources.

It is noteworthy the fact that – as shown by investigations carried out on the decision-making process within political parties – most parties will have the only decision-making body in their summits. That is, the treasurer and the president can decide alone on the sharing of millions of reais that will be deposited in the party's account. Therefore, political parties are repeating a bureaucratic anachronism and the elitization of their machines by conserving power in the hands of a few parliamentarians, or even non-parliamentary ones, as is the case of some parties.

Finally, it is worth noting the case of the rape of a 10-year-old girl whose abortion was carried out in Pernambuco under strong pressure and irrationalism on the part of religious fundamentalists who again led to the excommunication of the doctor who was responsible for the operation. This is the least, the serious thing is that the child, injured in his inalienable right, cannot count on the application of the penal code. She had to leave Espírito Santo and go to Recife and she and her family still suffered unbelievable pressures.

*Benicio Viero Schmidt is a retired professor of sociology at UnB. Author, among other books, of The State and urban policy in Brazil (LP&M).

 

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