Low growth projections in Brazil are a mixture of technical error and militancy, says Guedes

The projection of low economic growth in Brazil for next year, estimated at 1% by the IMF (International Monetary Fund), is wrong, defended the Minister of Economy, Paulo Guedes, this Tuesday (11) at the body’s headquarters, in the US capital, Washington. According to him, the projections are contaminated by technical errors and political motivations. “They are always making mistakes and they will make mistakes again,” he said.

“They foresaw that our fall [no PIB] it was going to be ten [pontos percentuais em 2020], we fell three. They predicted that Brazil would not return in V [referência à curva do PIB em uma recuperação econômica acentuada após uma queda drástica], Brazil returned in V. Then they predicted that the following year Brazil would not grow, we grew again, they are now reviewing upwards. They are predicting a low growth for next year. Possibly they think the other candidate will win [Lula], then the growth will be really bad. But with us it will continue to grow.”

An IMF report published this Tuesday (11) pointed out that Brazil should grow below the global average both this year and next. In 2022, the country should have a gain of 2.8% in its GDP (Gross Domestic Product), according to the organ, and the world should register an average growth of 3.2%. For next year, the outlook is for Brazil to grow by just 1%, while the world should grow by 2.7%.

As well as projections by economists and Brazilian bodies, the IMF forecast on Brazil’s GDP grew throughout 2022 – the data released this Tuesday is two points higher than what was estimated in April, while expectations fell in other regions.

Guedes points out two factors for lower expectations than the final result. The first, according to him, is a problem in the calculation models, which favor public investment, which is falling, over private investment, which, according to the minister, is on the rise in Brazil. “The models have no grip and are failing. That’s the technical explanation.” The other motive would be militancy, in the minister’s words, “political narrative rather than respect for facts.”

“The fund is a technical error. In Brazil, there is a part that is a technical error and a part that is militancy. We have been watching this roll of misfortune for four years. Next year is always a misfortune, then it doesn’t happen, then the next year is going to be the misfortune, then it doesn’t happen”, he said.

Despite what the minister says, even government institutions have revised their expectations for the Brazilian GDP this year. The Ministry of Economy itself revised the data in September to 2.7%, compared to the 2% previously forecast.

The Central Bank and Banco do Brasil also presented more optimistic perspectives recently. GDP revisions are common throughout the year in all governments.

Guedes also defended the release of aid to the population. In the final stretch of the reelection campaign, President Jair Bolsonaro (PL) promised payment of a 13th installment of Auxílio Brasil for women, in addition to extra benefits for taxi drivers, among other categories.

The minister, who was once critical of programs such as Bolsa Família, defended income distribution programs in Washington. “Some countries are taxing exports to try to bring down the price of domestic food. What Brazil did was give the resources instead of penalizing and reducing agricultural production with taxes,” he said. “It lets you export, but it also gives Brazilians more resources so they can also buy food.”

Paulo Guedes traveled to Washington to attend the annual meetings of the IMF and the World Bank. In the morning, he participated in a meeting with ministers of Economy and Agriculture of the G20 countries, who discussed the food crisis and the global energy crisis. At the event, Guedes once again defended the idea that Brazil guarantees internal food security while feeding 1 billion people in the world.

Recent research, however, points to an increase in hunger in Brazil. According to Datafolha, in July, one in three Brazilians said that the amount of food at home was not enough to feed their family, high compared to the previous survey, in May, when this rate was 26%. A United Nations report also pointed out that 15.4 million Brazilians were food insecure in the country, that is, starving, between 2019 and 2021.

IMF neglected inflation in the world and misguided it, says Guedes

In a statement to the International Monetary Fund released on Tuesday, Guedes said that the IMF had neglected the magnitude of global inflation, which the body today identified as the greatest threat to global economies, and misguided countries.

“Unfortunately, the IMF’s bilateral and multilateral surveillance overlooked the nature, magnitude and extent of the rise in inflation that began in 2021. As a result, the Fund’s policy stance was misguided in several cases,” the minister said.

He also advocated that the body make an internal reorientation to strengthen its capacity for macroeconomic and financial analysis, as well as supervision and policy advice, “to restore the credibility that was lost in this process.”

To fight inflation, “central banks must show unwavering determination in the fight against inflation”, maintains the minister, with interest rates above the neutral level for an extended period.

Brazil has repeatedly increased basic interest rates since March 2021, when they were at the level of 2%, to contain the increase in inflation, and reached 13.75% per year.

“While many observers around the world mistakenly considered global inflationary pressures to be temporary, in Brazil we realized very early on that a combination of factors was at play, including an increase in demand, in addition to the supply shock,” wrote the minister, who said that early tightening has made the country reap the benefits of falling inflation before other countries.

In the statement to the Fund, Guedes also defended that countries should have a consistent fiscal policy and that imbalances with fiscal stimulus can feed inflationary pressure and make the work of central banks even more difficult. According to Guedes, tax collection reached a record in Brazil in 2021, with an increase of 17.5% in real terms.

In Washington, the minister met with Mexico’s finance chief, Rogelio Ramírez de la O, and discussed the increase in exports of agricultural products, while he heard from his counterpart a plea for an increase in the sale of Mexican cars in Brazil. “We are talking about this, but naturally our preference is always to preserve our industrial pact”, stated the minister.

At the end of the day, Guedes will also meet with executives at the Brazil-United States Business Council, which brings together representatives from both countries.