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Monday, January 30, 2023
HomeEconomyLula's decision to slice up the economy paves the way for slowness...

Lula’s decision to slice up the economy paves the way for slowness and disagreements

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President Luiz Inácio Lula da Silva’s (PT) decision to split the Ministry of Economy into four folders helped the new government to accommodate the winning coalition in the elections, but it should generate divergences in policy discussions and greater slowness in the functioning of the public machine.

Areas that need to communicate in order to manage the country’s finances will again be separated and under different commands. The National Treasury, for example, is in the Ministry of Finance, of Fernando Haddad (PT). The SOF (Federal Budget Secretariat), a related area, responds to Planning and Budget, by Simone Tebet (MDB) —who ran for President and, in the second round, supported Lula at the polls.

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The Treasury is responsible for managing the public debt and the Union’s cash, taking care of the flow of payments for federal government commitments, as well as compliance with fiscal rules. SOF, in turn, takes care of formulating the Budget and managing credits, managing demands from the portfolios and indicating how much each one can spend.

In addition to practical changes, the division of the Economy can help to generate clashes between Treasury and Planning, or between Treasury and the portfolio dedicated to industry, recalling episodes that pervade the economic history of Brazil. Disagreements about the size of expenses, trade liberalization policies, among others, were frequent in the years when these departments were under different commands.

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Despite possible disagreements, the division was praised by the Minister of Finance in his inauguration speech last Monday (2). According to him, there is now a network of stations to think about the economic agenda, no longer a single “Ipiranga station” —as former president Jair Bolsonaro (PL) referred to former minister Paulo Guedes, in allusion to the brand’s advertising campaign. which claimed to have all the items sought by customers.

In 2018, Guedes made it a condition for embarking on Bolsonaro’s campaign to merge the various economic portfolios under his command, which ended up giving him the nickname “superminister”.

The merger of the bodies faltered at first, with the difficulties of managing the transatlantic that had become the government’s economic area. Reports from different members of the old Economy, however, are that there was a gradual gain in agility in the work, mainly due to the greater ease in discussions.

In Guedes’ super-ministry, former ministries became special secretariats, all following the same economic policy guideline —the liberal agenda that aimed to reduce the size of the State and open up the economy to the rest of the world. Any disagreements between these bodies were resolved by the minister himself.

Lula, in turn, usually tells allies that he likes disagreements — a way of demonstrating that he prefers to hear different opinions before making the final decision himself.

Under the PT, the Ministry of Economy was divided into Finance, commanded by Haddad; Planning and Budgeting, under Tebet; Management and Innovation in Public Services, with Esther Dweck; and Development, Industry, Commerce and Services (traditionally called Mdic), under the management of vice-president Geraldo Alckmin (PSB).

The Ministry of Labor and Social Security was also sliced, giving rise to two new folders, but the structure was no longer under the umbrella of the Economy since July 2021.

In the hard core of the economic area, Haddad and Dweck are cadres more aligned with the PT. Tebet and Alckmin, on the other hand, have as advisers economists identified with a more liberal line.

In an attempt to avoid speculation about possible clashes, the discourse behind the scenes has been that Tebet and Haddad will work together to formulate a new proposal for a fiscal rule for the country, as well as to expand the work of evaluating public policies, with the possibility of review and improvement of programs.

When his name was announced at the end of December, Tebet even called Haddad to take a picture with Lula, in a gesture that indicated an attempt to show harmony between the two portfolios.

However, the potential disagreement between the two was mentioned by the minister herself in her inauguration speech, on Thursday (5). She said she was surprised by the invitation because she would work in an area where she has “some disagreement” with the other starters. “A Democratic president doesn’t just want the same, he wants the different to add up,” she added.

Economist Elena Landau, who was part of Tebet’s team during the campaign, stated that the minister’s work will involve partnership. “The joint work was clear,” she said.

Another point of attention will be the recreation of the Mdic under the leadership of Alckmin. The portfolio tends to be more sensitive to the aspirations of the business community, which seek incentives for production and resist greater trade opening. Part of this view tends to oppose the Treasury’s objectives, especially in terms of measures that affect public finances.

In addition to political differences, slicing up ministries can lead to redundancies or practical problems. Of the four ministries, three must have a secretariat dedicated to the international area.

At the Treasury, the focus in the international area should be on discussing agreements such as Mercosur-European Union and joining the OECD (Organization for Economic Cooperation and Development). In Planning, according to members of the government, the function will be more related to multilateral organizations. At the Mdic, the axis should turn to discussions related to foreign trade, and possible measures against practices of economic abuse in relations with other countries.

The folders also needed to recreate legal advisory bodies. For these reasons, the division of folders even made it difficult to solve the puzzle of positions and functions to be distributed on the Esplanada dos Ministérios.

In terms of efficiency, a study carried out by the National Treasury, in partnership with the IDB (Inter-American Development Bank) and the Publix Institute, analyzed the organizational architecture of the Budget and the Treasury of other countries to compare the adopted arrangements. The conclusion was that, among ten countries analyzed, six adopted the centralized model —with Treasury and Budget under the same body or ministry.

In the OECD, 29 out of 35 countries have both structures under the same folder. According to the study, this model has advantages such as integration between areas and the existence of a unified leadership, capable of aligning the policy to be implemented and mediating any differences. In practice, says the text, the so-called “expense cycle” is all in the same body, facilitating decisions and processes.

In the Brazilian experience, in which the Treasury and Budget were centralized between 2019 and 2022, reports are that even physical proximity helped to integrate teams. Before, the buildings were ten kilometers apart.

The decentralized model, on the other hand, provides greater independence of action and the possibility of “checks and balances” in decisions. Technicians who worked on the study claim that “there is no right or wrong”, although they recognize that the efficiency gain in processes during the period of integration between Treasury and SOF was significant.

The risk of loss of efficiency is precisely one of the criticisms of Paulo Uebel, former special secretary for Management at the former Ministry of Economy. He also lists increased bureaucracy and machine swelling on the list of problems. “Processes take longer, slower, you have to change ministries, send it to one, send it to another.”

“Because of this, there is a natural tendency to increase the structure, with each person wanting more budget, more positions and more competitions”, he says. For him and other former members of the team’s leadership, it is unlikely that the new government will be able to operate without increasing its costs.

Uebel considers that, despite the listed problems, the presence of more ministers can divide the workload and join forces in favor of the government’s objectives.

Carlos da Costa, former special secretary to Guedes and current head of the Ministry of Economy office in Washington, corroborates the view by stating that the unified work was fast, especially in the policy-making phase of the portfolio, but that agility was lost when one sought alignment with other areas of government.

“The design of the programs was very agile. That’s how we managed to be quick in policies such as the law of economic freedom, the startup framework, pension reform and in the pandemic, when we carried out 600 measures in four months. Now, when other ministries were involved at that moment of later alignment, sometimes it took longer”, he says.

Costa says that there were disagreements between his special secretariat, which had a similar structure to that of the Mdic, and the Federal Revenue – but that the themes were debated until a consensus was reached and that the same should happen in the new government.

“The Treasury is always the one that makes the budgetary restriction explicit. It is a healthy conflict that happens in every country in the world”, he says. “They [Receita] they always want to ensure that there are no exceptions, while we, who have more contact with the productive sector, explained that there had to be exceptions, like in the chemical industry and in semiconductors, for this and that. We discussed in harmony and approved a lot, and I think that’s what will happen now “, he says.

In the pre-Guedes model, Fazenda and Mdic clashed, for example, in the creation of Rota 2030, a subsidy program for the automotive sector created during the government of Michel Temer. The then Minister Henrique Meirelles (Finance) disagreed with the format required by the then Minister Marcos Pereira (Industry) and the Civil House had to intervene to resolve the impasse.

Carla Beni, master in economic history and professor of economics at FGV (Fundação Getulio Vargas), recalls that the ministries in the area have already been the scene of other historical disagreements, between Mário Henrique Simonsen (Finance) and Delfim Netto (Planning), or Joaquim Levy (Finance) and Nelson Barbosa (Planning).

Despite this, she says that the greater number of folders can bring advantages. “It’s better for the public, because from the outside you can better follow the results,” she says.

For her, the fact that three of the four ministries of the hard core of the economic team (Haddad, Tebet and Alckmin) are potential presidential candidates can generate conflicts and the desire of one to want to “stifle” the other, but it can also make them want to show results for the society. “The more efficient each one is in their portfolio, the better for each one in 2026.”

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