Guedes admits the economy will slow down in the face of rising interest rates

Economy Minister Paulo Guedes admitted that the economy will slow down, but said that this is “normal” in a context in which basic interest rates will rise “a little” in the fight against inflation.

Guedes said that inflation will emerge with force in the United States, which will make central banks around the world, including the Brazilian one, tighten.

“Everyone will have to back off, but I think that Brazil has investment dynamics, as if it were the S-curve, real investment soaring, so interest rates will rise, because we are slowing down, we are slowing growth a little,” he said this Thursday (11) by participating in the Itaú Macro Vision conference, organized by Itaú Unibanco.

“It’s completely different from their problem [EUA], their problem is that they were already in synchronized deceleration, and at the time they are trying to rebound [retomada], inflation comes with everything, they are without growth dynamics. Time will tell”, he added.

Guedes also stated that there is “a lot of passion” in the assessment that the PEC (proposed amendment to the Constitution) of the Precatório is a default, arguing that it “evidently is not” and noting that the government is very hopeful after its approval in two rounds in the Chamber of Deputies.

The PEC defaults on the Union’s judicial debts and has become a priority of the Executive to guarantee the payment of Brazil Aid of R$ 400 from December until the end of 2022, the year in which Bolsonaro is expected to run for re-election, in addition to making room for other expenses federal agencies. Under the proposal, around R$90 billion should be released for expenses next year.

“The first big advantage is that [a PEC] makes Budget achievable. The second big advantage, even more important, is that this extends to the entire foreseeable future, in other words, there will be no more scares in court orders,” he said.

Asked about the government’s agenda ahead, the minister defended the effort to approve the Calote PEC in the Senate still in 2022.

“I would do an administrative reform now in the Chamber, I would try to approve Precatório in the Senate this year. Next year we have Correios, we have Eletrobras, that’s no problem for you to do in January, February, March. What do you have to approve? now it’s the social programs because you have to start running this year, you can’t create it in an election year,” he said.

Guedes defended that the PEC, in its final design, revises the ceiling, pushing into the mechanism a series of expenses that, in principle, would be outside the rule that limits the annual growth of public expenses, such as those related to vaccination.

“You know that accelerating inflation took our discretionary space. We were going to have a compression of discretionary space that no government had. Now we are going to maintain the same discretionary space that we had before, so there was no abuse,” he added.

The minister also stated that the government will try to approve the administrative reform by the end of the year and that he is asking for support on this front after nodding positively towards the extension of the exemption on the payroll of some sectors.

Earlier, Bolsonaro announced that the government will keep the payroll exemption from 17 sectors, such as textiles, construction and communication, for another two years, until the end of 2023.

“In the reinstatement battle, it is clear that we are on the side that wants to relieve the burden, but we ask for support in return [na reforma administrativa], that then we have R$ 30 billion per year of expense reduction that more than offset R$ 8.5 billion of non-repayment,” he said.

The minister also defended that the Brazilian fiscal remains “very strong” and assessed that states and municipalities have improved finances because the government has halted expenses, such as those related to civil servants’ payroll.

“We are following our original program,” he said.

Guedes also stated that there was an informal conversation in the government about the privatization of Petrobras, citing the idea that the shares in the oil company held by BNDES would go to a fund to eradicate poverty.

“A development bank carrying Petrobras shares, this is just to fatten the portfolio and for us to pay a good management fee for those who are working in the public bank,” he said.

He again mentioned the idea of ​​taking the state-owned company to the Novo Mercado segment on the Stock Exchange, arguing that this would make the company’s shares appreciate.

“Put in a poverty eradication fund that already exists and is there, put some Petrobras shares in there, which BNDES has, for example. It says you go to the Novo Mercado, you create in three, four weeks R$ 150 billions of new wealth that did not exist simply by arbitration to move from public management to private management,” he said.

“When you make a move like this, you’ve created value,” he defended.

The day before, President Jair Bolsonaro (no party) spoke again about the privatization of Petrobras, calling the oil company a “monstrengo” which, according to him, works so that its shareholders do not have losses.

Earlier this month, Petrobras reported that the Ministry of Economy had sent a communication to the company stating that there were no studies for the privatization of the company, after Bolsonaro had made several statements on the matter.