Guedes says Europe has resumed interest in Mercosur agreement

Economy Minister Paulo Guedes said he heard from European representatives that there is greater interest in advancing talks to close a trade agreement between Mercosur and the European Union.

“Conversations are more concrete and fluid”, said Guedes, during a press conference in Washington, this Thursday (21). As an example of this, he commented that he noticed less resistance from countries like France and Belgium to close partnerships with Brazil.

Guedes came to Washington to participate in the spring meetings of the IMF and the World Bank, held throughout this week. He should stay in the American capital until the end of the week.

“Countries are understanding that Brazil is a key player in the world’s food and energy security,” stated Guedes.

The minister said that the disruptions generated by the Ukraine war made more countries look to Brazil as an option to provide food and fuel, and that this opens up possibilities for the country to grow, as it has physical proximity to the US and Europe and, at the same time, time, to be a nation that usually maintains international neutrality.

On the readjustment of federal servants, Guedes said that things are still being negotiated, as it is necessary to define where the cuts will be made to enable the high. “Now it’s time for political decisions. Everything can always change until the day of the announcement,” he said.

Last week, the federal government decided to grant a 5% readjustment to all federal civil servants from July 1, even without enough space in the Budget – which will lead to a cut in funds in other areas. The decision was confirmed by Sheet with members of the economic team and the Planalto Palace.

The increase will also include members of the Armed Forces. The total cost of the measure is estimated at R$ 7.9 billion in 2022, considering its reach not only on the Executive, but also on careers in the Judiciary, Legislative, Public Ministry and Defender’s Office.

The 2022 Budget has only set aside the amount of R$ 1.7 billion for readjustments or restructuring of civil servants’ careers this year and, in addition, since March, resources have been contingeted to respect the spending cap rule (which prevents growth federal spending above inflation). Therefore, the decision demands that other areas lose resources.

According to government officials, the measure costs BRL 6.3 billion in 2022 for the Executive Branch alone, and the funds will be obtained through a linear cut in the ministries’ funding and investment expenses (the so-called discretionary). As there is already an amount of R$ 1.7 billion reserved for readjustments, the net need for a reduction in portfolios will be R$ 4.6 billion.

The idea is that the correction will be applied to the payroll for the month of June, whose payments start to fall into the servers’ account on July 1st.

Legally, the readjustment is considered viable without jeopardizing Bolsonaro’s pretensions to run for reelection. The electoral law prohibits, in the 180 days prior to the election, a general review that exceeds the recomposition of purchasing power — that is, official inflation.

According to technicians, the 5% would be below market forecasts, which are close to 7%.

In Washington, Guedes met with ministers from other countries, international authorities, businessmen and investors. This Thursday (21), he attended meetings with representatives of JP Morgan and Itaú banks in Washington.

On Tuesday (19), Guedes gave an interview to the Center for International and Strategic Studies (CSIS), in which he said he considered Bolsonaro visited Russia at “an inappropriate time”. He also stated that Brazil is against the invasion of Ukraine, but questions the sanctions applied to the Russian economy.

Also on Tuesday, the IMF released its projections for the world economy. The entity estimates that Brazil should grow 0.8% in 2022, 0.5% above what it forecast in January. The improved outlook was driven by higher commodity prices, especially oil.