Brazil is doomed to grow, the question is whether with more or less inflation, says Guedes

Minister Paulo Guedes (Economy) said this Thursday (2) that Brazil is doomed to grow, but he said that the effort to fight inflation will reduce the pace of expansion.

He stated that prices have risen due to factors such as the disorganization of global supply chains and suggested that the independent central bank will control prices through interest rates.

“Brazil is going to grow. It is going to grow a little less, because we are going to be fighting inflation,” he stated at an event about airport concessions. “Brazil is doomed to grow, the question is whether there will be a little more or less inflation. And that will depend precisely on how we are going to fight this inflation,” he said.

“We decreed an independent BC, the first time that we are going to have an independent BC in the election. This is a demonstration of commitment to the institutional advancement of the country,” he said, also stating that in previous governments the interest rate level was falsified before the elections.

“[A inflação] it will be dominated, it will be controlled, it will go down. And Brazil will grow again,” he continued, saying that the conversation that dictates the opposite is “crazy”.

The Brazilian economy retreated 0.1% in the third quarter of 2021, compared to the three immediately previous months, show GDP (Gross Domestic Product) data released this Thursday (2nd) by the IBGE (Brazilian Institute of Geography and Statistics). This was the second quarter followed by a retraction in activity.

Economists have lowered the forecast for GDP in 2021 and 2022, but are still divided over the possibility of a downturn next year.

According to the weekly Focus survey, by the Central Bank, economists expect GDP to grow 4.78% this year and 0.58% next year, from rates of 4.80% and 0.70% expected before.

For Guedes, the fact that the stock market rose even after the news of the retraction indicates that there is a bet on growth. “Today is an interesting example. ‘We have entered a technical recession.’ GDP fell 0.1% in the quarter, and the stock market rose 3%. If anyone had taken seriously that GDP is going to fall, the stock market was not rising,” he said.

Despite the appreciation today, the Stock Exchange has accumulated a drop of more than 12% this year and, in recent months, the PEC (proposal to amend the Constitution) of Precatório – which makes room in the Budget for more expenses – has intensified. The measure also caused stress in the exchange and interest market.

For Guedes, saying that the government has lost control over public accounts is bullshit. Previously, he has said he expects the market to avoid a “childish” stance on the measure, which circumvents the spending ceiling.

“Let’s go to the political dimension and concern for the social, [o movimento é] perfectly understandable. I hope the markets understand this rather than taking a slightly more childish position that ‘the symbol is the ceiling’, ‘the ceiling or death’, ‘I’m going to resign today because the political class has decided to pierce the ceiling'” , said Guedes on the 24th.