Public debt may grow uncontrollably with PEC, says economist

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In an interview with CNN this Wednesday (23), the senior economist at LCA Consultores, Thais Zara, assessed that the so-called PEC do Duplo, presented without a counter-proposal for the fiscal framework, has raised concerns in the market regarding the country’s public debt.

According to her, there is a risk that the debt will grow “uncontrollably” and “explosively”.

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“There are several factors that are worrying the market in relation to the PEC: in addition to the value itself, the way it was presented, without any type of tax constraint, and the indefinite period”, she said.

“As it stands, the PEC does not re-discuss the country’s fiscal framework and does not bring perspectives on when we would have a sustainable debt-to-GDP trajectory, which is the major concern. Without a framework, it can grow uncontrollably, because these are expenses that will remain high for a long time and without a discussion on how to counterbalance this ‘explosive’ debt trajectory.”

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In Zara’s view, “an explosive debt trajectory” increases the Brazil risk, which, in turn, can devalue national assets in general, such as the exchange rate and the Stock Exchange. “That’s another big market concern,” she said.

“If we have a more dehydrated and structured PEC in relation to what was presented, around BRL 100 billion, I believe that the markets will still be able to absorb it relatively well, because it was already known that a hole in the ceiling would be necessary for the maintenance of the Aid Brazil.”

Source: CNN Brasil

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