Opinion – Vinicius Torres Freire: I swear in the money wholesaler wasn’t so expensive since Dilma 2

The basic interest rate on the money wholesale market had not been so high since October 2015, when the government of Dilma Rousseff was going into a final crisis. There was then a financial panic because of the deficit and the proposed deficit budget for the following year. The then Minister of Finance, Joaquim Levy, who had come in to carry out “reforms” and save Dilma from the fiscal debacle, was considered the undead.

The real one-year interest rate is close to 8.4%. Before the beginning of the end of Dilma Rousseff, it had come close to that in the worst months of the 2008 financial crisis. Before 2006, it was generally higher.

And? It is yet another sign of the ongoing financial crunch: expensive dollar, high interest rates around the world, commodity prices (in dollars) stable or falling, stock prices on the stock exchange dropped and passed out on the ground, etc.

In theory, these are indications that the economy will hardly grow in 2023. GDP per capita (per head, GDP divided by population size) will decrease: impoverishment, on average.

Even with this bad tightening of financial conditions, inflation still shows no sign of a lasting downturn. The IPCA should come below zero in July and low in August because of tax cuts on fuel and energy. Aside from that, as a result of one-off government interventions, inflation is still widespread and has other signs of resistant infection.

For now, the drop in the price in dollars of several commodities does not refresh the situation, with the exception of the case of ores (iron, copper). As it should be easy to see, the rise in the dollar prevents the price of food, oil and derivatives from falling.

The fear or first signs of recession in rich economies depress commodity prices. It is possible that they will fall further. It won’t do much good if the dollar continues to hover around R$5.40. To make matters worse, the drop in the price of these basic materials, which we export in droves, will take income from companies in the sector and aggregates. The agribusiness economy and exports were one of the reasons for this little growth in 2022.

Longer-term interest rates are also salty, which has been going on since the final quarter of last year. Part of the salt came from the gambiarra with the spending ceiling, the work of Jair Bolsonaro and his regents of the center, now expanded with the pull or pull of the PEC dos Bilhões, the final demoralization of the ceiling and Brazilian tax laws. Inflation is worldwide, right, but the bucket of whipped cream and the moldy strawberries on this bad cake were the work of Bolsonaro and the powerful centrão.

The most recent electoral fraud, in addition to casting shame, derision and discredit on Brazilian economic policy, creates obvious material problems. At the end of 2022, inflation will be contained (because of a temporary fall in taxes), an Auxílio Brasil that will have cost R$ 120 billion a year (before the embezzlement, it cost R$ 90 billion), public servants waiting for increase and almost the entire country is waiting for a magic solution to poverty, low growth and the ruin left by Bolsonaro.

The interest rate discussed here is the DI rate for one year trades, discounted for inflation for the next 12 months (ex ante). It is a kind of interest floor in the financial and credit market. We don’t know how the rates are at the banks, because the latest data available is from February, a delay due to the strike at the Central Bank.

It is possible to make a patch on these rotten rags. The new government would have to propose sweeping and rapid changes in an attempt to reach a national agreement — or close to that, as at least a third of the country is adept at destruction. It’s not yet in sight.