For the market, having fiscal control is the way to allow social improvement

Having a responsible economic policy with the control of spending and public debt not only does not conflict with social investments, but is also a preponderant condition for the population’s well-being to actually improve.

If investors, analysts and economists in the financial market could directly respond to President-elect Luiz Inácio Lula da Silva, the summary would be this.

On Thursday (10), a speech made by PT in which he questioned the severity of spending cuts policies made the main indicators of the Brazilian financial market have the worst day of the year.

The stock exchange ended the session down more than 3%, in the biggest daily retraction since September 2021, and the dollar returned to R$ 5.40 – although both have rehearsed a recovery this Friday.

“Why don’t the same people who seriously discuss the spending cap not discuss the country’s social issue?”, asked Lula.

“This dichotomy does not exist, it is a fallacy”, answers the partner and chief economist of the manager Ryo Asset, Gabriel Leal de Barros, a specialist in public accounts.

“On the contrary, you can only guarantee public policies and have programs for the people who need it most if there is macroeconomic stability,” he told the newspaper. CNN Brasil Business 🇧🇷

More spending, more inflation

The logic behind this reasoning was explained this Friday by the current president of the Central Bank, Roberto Campos Neto, who entered the heated discussion in a lecture this morning.

“If there is no fiscal balance, we return to a world of uncertainty where the expectation of inflation rises, you disorganize the productive sector in the sense of investment, and in the end who suffers most from this is the population you want to help, because you hurts job creation,” he said.

The reasoning is that if a government with an already high debt, like Brazil’s, continues to spend more than it collects and without showing any signs of rationality in these expenses, the bill charged by its creditors – the financial market – begins to rise and an hour arrives.

“If there is no sign of a reduction or stabilization of the public debt, there will be an exchange rate depreciation, which brings inflation, which affects precisely the most vulnerable and requires higher interest as a response”, explains economist Juliana Damasceno at Tendências Consultoria.

“And what company or person will want to invest in productive capacity if they can invest in a bond that pays much more?”

Review of unnecessary expenses

According to economists consulted by the CNN Brasil Business the solution is not to paralyze social programs, nor to spend money indiscriminately to maintain them, but rather to reorganize and redirect the enormous and inefficient expenses that the Brazilian State currently has.

“The social question is urgent and necessary, and no economist, even liberal, is against it; the difference lies in how to accommodate this expenditure within our current structure,” said Sérgio Vale, chief economist at MB Associados and economics commentator at CNN.

“The more liberal ones would like to see a restructuring of public spending to incorporate social spending, while the left wants to add this spending, which would generate more growth and income and, with that, solve things. The problem is that, as happened in the past, this revenue and growth may not come at the desired intensity”, he continued.

As an example of expenses that could be improved so that there are more resources left for social programs, Vale mentions the billions of reais that the government fails to collect annually with subsidy policies for companies and also the need for an administrative reform, which should redesign the civil service public and remains stalled in Congress.

Damasceno, from Tendências, also recalls the exemption on the payroll of companies in different sectors, which continues to be renewed without being revised. “Several studies have already shown that it is a policy that has not fulfilled its role of increasing formalization”, said the economist.

Barros, from Ryo Asset, also adds that a review of the very framework of social programs, a disorganized network of benefits, according to him, in many cases overlapping and inefficient, would already generate savings that would allow spending more and better with those who really need it. .

He mentions the salary bonus, a kind of 14th salary paid by the government to registered employees who earn up to two minimum wages, while informal workers have no benefits, and Auxílio Brasil itself, which currently pays the same amounts to all families, regardless of size.

Simulations carried out by him estimate that the savings with a kind of fine-tooth comb in these programs would reach R$ 190 billion over ten years. If other broader measures are added, such as administrative reform, the expenditures currently in excess and to be cut could reach R$ 700 billion in a decade.

“Clearly, it’s not a problem of lack of resources, but of poor focus,” said Barros. “We spend a lot on poorly designed policies and, despite spending a lot of resources, we still can’t reach those who really need it.”