Guido Mantega: Bolsonarism led Brazil to the crisis, and the resumption will come with its end

At the end of 2022 we will be able to commemorate the burial of one of the worst governments in Brazilian republican history. If an autopsy is performed on the corpse of pocketnarism, strong signs of an anachronistic neoliberalism will be discovered, which is no longer practiced in any important country in the world.

The Brazilian economy ended 2021 stagnant and will continue to do so throughout 2022. According to the Focus survey by the Central Bank (01/03/22), GDP growth in 2022 should not exceed 0.36%.

With this meager growth, unemployment will remain high and should repeat, in 2020, the 12% of 2021, while inflation will be retreating from 10% of 2021, to something around 6%, at the expense of a fierce contractionary monetary policy, that will paralyze the Brazilian economy.

Hunger and poverty will continue to increase with the government’s neglect. The R$400 grant in Bolsa Família will benefit only a small portion of those in need.

To make this situation worse, there is an advance in the Covid-19 pandemic and new flu, which can reduce the growth of rich countries, directly affecting Brazilian exports. The American central bank (Fed) announced a tightening of monetary policy in 2022, with an increase in interest rates, which should cause foreign capital to leave the country.

Between 2019 and 2022, the Brazilian GDP will have an average growth of 0.5% per year. A little better than the average decrease of -0.13% per year by the Temer government, between 2016 and 2018.

Instead of putting the State in the field to help victims of the crisis and encourage the resumption of investment, as the G20 countries did, the Bolsonaro government reduced emergency aid from 2020 to 2021, and has been reducing public investment since the beginning of your government.

This dramatic situation, produced by the economic policy of Minister Guedes, contrasts with the performance of the developmental social economic policy of the Lula and Dilma administrations.

Between 2003 and 2014 the Brazilian GDP had an average growth of 3.5% per year, while unemployment dropped to below 6% of the economically active population. At the end of 2014 Brazil was a low-indebted country, with a net public debt equal to 32.5% of GDP, while the Central Bank accumulated reserves of US$374 billion. No wonder, as of 2008 Brazil started to receive positive investment grade ratings from the main risk rating companies.

The Lula administrations were marked by increased investment and by a responsible fiscal policy, which made the increase in social funds compatible with the largest primary surpluses of the Brazilian economy.

Poverty fell from 26.7% in 2002 to 8.4% in 2014. For the first time in 500 years, the income of the poorest grew more than that of the richest and inequality decreased in the country. That’s how Brazil left the hunger map and became the sixth largest GDP (Gross Domestic Product) in the world, in 2011.

But neoliberal governments reversed part of these social and economic advances. The Temer government carried out the labor reform that reduced rights and wages, and also approved the spending cap law, which produced numerous distortions in budget management. The fiscal managements of the Temer and Bolsonaro governments were a disaster that, since 2016, has only accumulated primary deficits.

It is clear that there are no easy ways out to fix the dramatic situation that will be left by the Temer and Bolsonaro governments. It is a cursed inheritance that will make the GDP of 2022 fall back to the values ​​of 2013.

To face this challenging situation, the democratic forces will have to draw up an economic and social development program for the reconstruction of the country.

Certainly, this program will contain emergency measures to fight hunger and poverty, providing conditions for the poorest population to survive.

The government must coordinate an ambitious plan of public and private investments, in order to expand the infrastructure and increase productivity, generating many jobs.

It is necessary to design a long-term investment program that supports growth and increased productivity.

It is essential to carry out a tax reform that simplifies federal, state and municipal taxes. It is also important to reduce the taxation of the poorest, increasing taxes on the income and wealth of the richest 1%, in order to reverse the regressiveness of the Brazilian tax structure.

Monetary policy must keep inflation under control, without exaggerating the interest rate, to preserve growth and, at the same time, avoid an unpayable debt service.

The new government must resume industrial and technological investment policies, which restore the competitiveness of Brazilian industry. Of course, without forgetting climate and environmental issues.

What is at stake in the next elections is whether we will continue with the disastrous economic policy of the Bolsonaro government and other neoliberal candidates, or whether we will resume the path of social-developmentalism towards the welfare state.

*This article does not express the point of view of Lula’s candidacy, which has not yet been launched, being the result of discussions by a group of economists who advise ex-president Lula.

This week, the Mercado section publishes a series of articles on economic issues considered sensitive by the main pre-candidates for the presidency of the Republic in this year’s election. The proposal is to start the debate on themes that should guide much of the campaign – such as reducing unemployment and inequality, raising income, fostering innovation, modernizing the business environment, improving the credibility of the fiscal framework, in short, putting the Brazil on the path of structurally robust and environmentally sustainable long-term growth. The articles, signed by economists who participate in the support group for pre-candidates, are published daily in alphabetical order.

Ciro Gomes (PDT), by Nelson Marconi; João Doria (PSDB), by Henrique Meirelles; Luiz Inácio Lula da Silva (PT), by Guido Mantega; and Sergio Moro (Podemos), by Affonso Celso Pastore.

According to their respective advisors, senators Rodrigo Pacheco (PSD) and Simone Tebet (MDB) are starting conversations with economic consultants and still do not have spokespersons in the area. Invited to represent President Jair Bolsonaro (PL), who will run for reelection, Economy Minister Paulo Guedes prefers not to speak at the moment.