Growing criticism of Brazil's economic policy

In Brazil, there is growing criticism of the financial and economic policy of the government Rousseff.

Your sleight be criticized. Thus runs Rousseff risk of losing their important pledge: confidence.
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Alexander Busch, São Paulo
Previously ignored the Brazilian government of President Dilma Rousseff all the critics who see their financial and economic policy as one of the reasons for the weak growth and stubbornly high inflation. But now, of any related, influential economist and former Economy Minister Antonio Delfim Netto has reported a word of criticism to which the government can not simply be dismissed as ideological. On the one hand sees net lack of trust between the government and the private sector as one of the reasons for the low rate of investment of 16% of gross domestic product (GDP).
Surplus conjured
On the other hand, he vehemently criticized the accounting gimmicks, Finance Minister Guido Mantega has the year's end quickly conjured a primary surplus. With the resulting loss of confidence in the ministry had achieved exactly the opposite of what it actually did, with an increase in the household want to achieve, said net. Because the primary surplus in the budget for more than a decade, one of the pillars of the Brazilian fiscal policy. Excluding interest payments must be at the end of the year - set by law - a surplus of 3.1% in relation to GDP are reported.
This primary surplus guarantees that Brazil sovereign debt in the medium term decline. The primary surplus target dates back to the times when Brazil was considered a bad debtor. Using the instrument of statutory primary surplus has succeeded Brazil's public debt lower in ten years from 52% to 35% of its GDP. Brazil is a net borrower since 2008, because its foreign exchange reserves are greater than its liabilities. Therefore, Brazil is by the rating agencies now classified in five years as a good debtor ("Investment Rating").
But since 2012, the government wanted to push the economy with tax cuts and government spending programs, in December, a gaping hole in the budget. With early dividends of state-owned banks such as Banco do Brasil and companies like Petrobras and remittances from the sovereign state funds resembled the Treasury from the budget. With this legal trick balance the government cut its fiscal credibility.
This loss of confidence comes at a bad time, as doubts grow simultaneously in the economy if the government is fighting inflation at all seriously. In the past year, inflation stood at 5.8%, beyond the fact envisaged limit of 5.5%. More and more economists doubt that we will succeed and central government, the rate of this year
In Brazil, there is growing criticism of the financial and economic policy of the government Rousseff. Your sleight be criticized. Thus runs Rousseff risk of losing their important pledge: confidence.
MerkenE-mail Print
Alexander Busch, São Paulo
Previously ignored the Brazilian government of President Dilma Rousseff all the critics who see their financial and economic policy as one of the reasons for the weak growth and stubbornly high inflation. But now, of any related, influential economist and former Economy Minister Antonio Delfim Netto has reported a word of criticism to which the government can not simply be dismissed as ideological. On the one hand sees net lack of trust between the government and the private sector as one of the reasons for the low rate of investment of 16% of gross domestic product (GDP).
Surplus conjured
On the other hand, he vehemently criticized the accounting gimmicks, Finance Minister Guido Mantega has the year's end quickly conjured a primary surplus. With the resulting loss of confidence in the ministry had achieved exactly the opposite of what it actually did, with an increase in the household want to achieve, said net. Because the primary surplus in the budget for more than a decade, one of the pillars of the Brazilian fiscal policy. Excluding interest payments must be at the end of the year - set by law - a surplus of 3.1% in relation to GDP are reported.
This primary surplus guarantees that Brazil sovereign debt in the medium term decline. The primary surplus target dates back to the times when Brazil was considered a bad debtor. Using the instrument of statutory primary surplus has succeeded Brazil's public debt lower in ten years from 52% to 35% of its GDP. Brazil is a net borrower since 2008, because its foreign exchange reserves are greater than its liabilities. Therefore, Brazil is by the rating agencies now classified in five years as a good debtor ("Investment Rating").
But since 2012, the government wanted to push the economy with tax cuts and government spending programs, in December, a gaping hole in the budget. With early dividends of state-owned banks such as Banco do Brasil and companies like Petrobras and remittances from the sovereign state funds resembled the Treasury from the budget. With this legal trick balance the government cut its fiscal credibility.
This loss of confidence comes at a bad time, as doubts grow simultaneously in the economy if the government is fighting inflation at all seriously. In the past year, inflation stood at 5.8%, beyond the fact envisaged limit of 5.5%. More and more economists doubt that we will succeed and central government to reduce the rate noticeably this year. You wonder if the monetary policy of the Ministry of Finance and Central Bank Council not long ago working with an inflation target of 5.5% instead of 4.5%. Already, the currency devaluation in Brazil for the fifth year in a row is greater than the average for the world's 15 largest economies and about three times as high as in the industrialized countries is currently ailing.
Inflation episodes
The stubbornly high inflation reduces the competitiveness of the Brazilian economy. The danger grows that the private sector feeds the high inflation expectations with anticipatory price increases. The risk of further price increases is also high. In Brazil this year comes to an energy crisis by the factor costs could rise further as recently 2002. The financial market is an indicator that investors expect rising inflation. Inflation-protected bonds they already require a spread of 6%. Thus Brazil infected with an inflation rate of 6%, with growth of just under 1% (2012) in a stagflation. The government is trying to cuts to public prices mitigate inflationary pressures. Rousseff has persuaded the mayors of major cities such as Rio de Janeiro and São Paulo to until mid-year to increase bus and train fares. Electricity prices have been reduced by 20% immediately.
Rejection of rate cuts
It is unclear at present, especially as the reduced confidence in the state will affect the interest rate policy of the central bank. Under President Alexandre rows of border stones, the central bank has lowered since the middle of 2011 in ten rounds the base rate of 12.5% ​​and now stands at 7.25%. At its last meeting two weeks ago, she felt the interest rate ("Selic rate") to not. In the statement published on the central bank announced that it would make until further interest rate cuts more. Because of stronger than expected rise in inflation
This is not good news for the economy. So far, the strong rate cuts since one and half years are dissipated without stimulatory effect on the economy. According to a survey of the industry association, the CRF investment intentions fell in early 2013 to its lowest level since the crisis of 2009. The weak domestic market, the collapse in exports and uncertainty over state intervention in key sectors such as energy, mining, banks are the reasons for the reluctance of entrepreneurs.