Edmar Bacha reviews Plano Real, Cruzado and contact with Furtado in an autobiography; see video

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“The exchange rate was made by God to humiliate economists. Nobody knows where it will lead.” Economist and writer Edmar Lisboa Bacha is often cited as the author of this sentence. Although he has used it several times and has never found anyone else to claim authorship, he says he doubts its originality.

The explanation for this comes from an episode involving the writer Millôr Fernandes, narrated in one of the passages that make up “In the country of contrasts: childhood memories for the Real Plan”, an autobiographical book written during the pandemic and released in October this year.

In conversation with the sheet, Bacha says that the work arose from the invitation of the ABL (Academia Brasileira de Letras), of which the winner of two Jabuti awards has been a member since 2017, to write a text in honor of the centenary of Celso Furtado’s birth. The two lived together during their time at Yale University (USA) in 1964.

From reading the letters he wrote to his mother at the time, the idea arose to prepare other chronicles about the period. Together they form the biggest chapter in the book, “Yale Chronicles.”

To prepare a book that went beyond these almost 70 pages, the author decided to reconstitute family and childhood memories, presented in a summarized manner at the beginning of the book.

Towards the end, he kept what he calls “what really matters to the general public”, his two stints in government. The first, in charge of IBGE during the Cruzado Plan. The second, as advisor to the Ministry of Finance and president of BNDES in the preparation of the Real Plan and in the FHC administration. The former president signs the book presentation.

Between the chapters on Yale and the Cruzado, Bacha also narrates the approximation with the wings of the MDB that would found the PSDB after the redemocratization process. And also about how the relationship with the opposition to the government would give him some problems with the dictatorship. Among them, a visit to the then president of the Arena, Filinto Müller.

It was at this time that he elaborated the fable about the king of Belindia, a criticism of the economic policy of the dictatorship, a theme that has already been explored in other books by the author —”The Economist and the King of Belindia: A Fable for Technocrats”, published in 1974. With its inequality, Brazil would be a combination of Belgium and India.

There is also room for a little economic theory. As he reports in the book, he was even classified by the military dictatorship’s intelligence service as an “auxiliary line” of the Brazilian Communist Party. However, he defines himself as a neo-Keynesian, who in the 1960s and 1970s maintained a flirtation with neostructuralism.

At the time, he believed that state-owned companies and protectionism would be the paths for the country’s development. He would drastically change his mind after his two stints in government.

“In the 1990s, this new Keynesianism emerged, based on a realization that, obviously, this Chicago School libertarianism was not giving relevant answers to the crises of contemporary capitalism”, Bacha tells sheet.

“Both practical experience and this international theoretical evolution brought me to what I am today. I became much more liberal from the point of view of economic analysis, although I always kept a very strong perspective on this social issue. I never abandoned the Belindia idea.”

About his first experience in government, he talks about a time when opponents came to power, after the end of exceptional regimes in Latin America. In José Sarney’s government, he is invited to head the IBGE.

It would be responsible for developing the calculation methodology so that it would be possible to separate the inflation in cruzeiros from the inflation in the new currency. This was amid pressures he saw as attempts to make up for price indices, which led him to leave office and earned him the nickname “the IBGE nun”.

From that time, he also kept a spreadsheet of political indications, some mentioned in the book.

Called by the PSDB, party to which he joined right after its founding, to integrate the Plano Real team, Bacha returns to government. The chapter on his participation brings, right at the beginning, the rapporteur of the meeting that could result in the disembarkation of FHC and his team from the Itamar Franco government.

It is on that day that the famous “papelzinho azul” appears, the first draft of the stabilization plan, inspired by the ideas of various members of the government, with whom the author insists on sharing the authorship of Real.

The happy ending to the plan, however, is incomplete, as the government refuses to send Congress a package of economic reforms. There were 63 amendments that could be more easily approved in the constitutional review of 1993. Among them, reforms that are still under debate today, such as tax and administrative.

The book also has space for controversies with former ministers Roberto Campos and Delfim Netto and two passages about the relationship with economist Maria da Conceição Tavares, during the dictatorship and during the Itamar government. In addition to the account of his political experience, from his college days to the negotiations on the Real, when he created a collection of phrases he calls a “parliamentary negotiation manual”.

Asked about the current risks to the legacy of the Plano Real, he says that politicians have learned that those who do not control inflation will lose elections or be banned. And that today there is a Central Bank capable of doing this work, but that the cost will be greater than necessary.

“With these two adverse conditions, without the fiscal component and with this permanent disturbance that Bolsonaro causes, this institutional crisis, the effect of a tough policy necessary to control inflation is recessive”, he says.

“That was not our legacy. Our proposal was to control inflation with growth.”

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