Guedes admits economy will slow down due to higher interest rates – 11/11/2021 – Markets

Guedes admits economy will slow down due to higher interest rates - 11/11/2021 - Markets

Economy Minister Paulo Guedes acknowledged the economy would slow down, but said it was “normal”, with basic interest rates rising “slightly” in the fight against inflation.

Geddes said inflation in the United States would emerge with force, leading to tightening of central banks around the world, including Brazil.

“Everyone will have to backtrack, but I think the investment dynamics in Brazil is, as if it were the S-curve, real investment was going up, so interest rates will go up, because we are slowing down, we are going to slow down growth a little bit. are doing,” he said this Thursday (11) while attending the Itas Macro Vision Conference organized by Itau Unibanco.

“It’s totally different from their problem [EUA], their problem is that they were already in synchronized deceleration, and at that point they were trying to ‘rebound’ [retomada]Inflation comes with everything, they are without growth dynamics. Time will tell”, he said.

Geddes also said that there is “a lot of passion” in the assessment that Precatorio’s PEC (Proposed Amendments to the Constitution) is a default, arguing that it “clearly is not” and noting that the government is very optimistic about it. There is approval in the Chamber of Deputies in two rounds.

The PEC defaults on federal judicial debts and it has become the executive’s priority to guarantee Brazil’s R$400 payments from December to the end of 2022, the year Bolsonaro is expected to run for re-election, among others. Federal agencies in addition to making room for expenses. Under the proposal, about $90 billion should be released for spending next year.

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“The first great advantage is that [a PEC] Makes budget feasible. The second big advantage, even more important, is that it extends to the entire foreseeable future, i.e. there will be no more fear of court orders,” he said.

Asked about the government’s further agenda, the minister defended an attempt to approve Calote PEC, still in the Senate in 2022.

“I will now make an administrative reform in the Chamber, I will try to approve Precatorio in the Senate this year. Next year we have Corios, we have Eletrobras, it’s not a problem for you in January, February, March. What Do you have to approve? Now this is a social program because you have to start running this year, you can’t make it in an election year,” he said.

Geddes defended that the PEC, in its final design, modifies the ceiling, introducing a series of expenses into the mechanism, which, in theory, would be outside the rule that limits the annual increase of public spending, such as those related to vaccination.

He said, “You know, the acceleration in inflation took our discretionary space. We were going to have a compression of discretionary space that no government had. Now we’re going to maintain the same discretionary space that we have.” was earlier, so there was no misuse.” ,

The minister also said the government would try to approve administrative reform by the end of the year and sought support on this front by nodding positively to the extension of exemptions on payrolls to certain sectors.

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Earlier, Bolsonaro had announced that the government would maintain payroll exemptions from 17 sectors such as textiles, construction and communications for the next two years until the end of 2023.

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

The minister also defended that Brazil’s fiscal deficit remains “very strong” and assessed that states and municipalities have improved finances as the government halted spending, such as those related to the payrolls of civil servants.

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

Geddes also said that there had been an informal conversation in the government about the privatization of Petrobras, citing the idea that shares in the oil company held by BNDES would go to a fund for poverty alleviation.

“A development bank carrying Petrobras shares, it’s just to fatten the portfolio and pay a nice administration fee for those of us who work in a public bank,” he said.

He again mentioned the idea of ​​moving the state-owned company to the Novo Mercado segment on the stock exchange, arguing that this would lead to appreciation of the company’s shares.

“Put in a poverty alleviation fund that already exists and is there, put some Petrobras shares there, that is with BNDES, for example. It says you go to Novo Mercado, you get $ in three, four weeks 150 billion of new assets existing only by arbitration to be transferred from public management to private management,” he said.

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“When you make moves like this, you create value”, he defended.

The day before, President Jair Bolsonaro (no party) spoke again about the privatization of Petrobras, calling the oil company “Monstrengo”, which, according to him, works so as not to harm its shareholders.

Earlier this month, Petrobras reported that the economy ministry had sent a communication to the company saying no studies had been conducted to privatize the company, as Bolsonaro had made several statements on the subject.

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