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Haddad neglects the importance of reducing public debt

Bolsonaro is a toxic, homophobic, and sexist speaker, but he seems to know how to face the great problems of the Brazilian economy

Haddad neglects the importance of reducing public debt

Bolsonaro and Haddad will meet at the polls this October 27. The latest voting elections show a wide advantage of the right-wing candidate, who would take 60% of the vote, despite his divisive and intolerant speech. This should not come as a surprise, even with an inclusive discourse, the PT has failed to recognize that the disenchantment of the Brazilian people comes from the poor performance of the economy they have to live, something for which they have not proposed any solution.

Leer en español: Haddad descuida la importancia de reducir la deuda pública

In the first place, we must recognize that the Brazilian economy had one of its worst years in recent history, and that this poor performance not only affects investors, bankers, and businessmen, it also affects the average Brazilian.

An example is the excessive increase in public debt, a problem that Brazil has been undergoing since 2006, when its indebtedness began, which in 2017 reached up to 72.5% of GDP, almost double the average of emerging countries.

The problem of public debt concerns all the inhabitants of the country, normally it is not an issue that mobilizes the masses, nor ignites the passions of the electorate, but in the case of Brazil, it causes the despair of the Brazilian worker with the economy that gives him to live.

An excessive public debt brings, in the first instance, an increase in mistrust on the part of international lenders. This also brings problems when financing public works that would positively affect all Brazilians. However, in addition, it forces banks to raise interest rates because of the low liquidity that arises from a reduction in investment.

High interest rates will make it difficult for Brazilians to access credit, which will negatively affect the creation of companies and jobs or their subsistence over time. More than 2,000 companies had to close between 2015 and 2016 according to data from the Brazilian Institute of Geography and Statistics (IBGE), which resulted in the loss of 400,836 jobs. Probably not all the closures came because of lack of access to credit and high interest rates, but it is impossible to deny the importance of one thing over the other.

Haddad's solutions are insufficient

Fernando Haddad, in his proposals, contemplates solutions to this problem. On the contrary, a central piece of his agenda would be to revoke the freeze on public spending introduced by current President Michel Temer. Its only consideration in this regard includes plans to reduce tax evasion, which if successful can help to solve the State’s problem, but it is far from being a comprehensive plan.

Bolsonaro, on the other hand, has more strategies to face the problem. Using privatizations and concessions, he argues, could quickly reduce public debt by 20%. In addition, in his government, there would be a considerable reduction in the size of the ministries and the bureaucratic organisms in general, another important step to dent the public debt.

To this, we must add a reform to the pension system, which would introduce a new retirement system by capitalization, that is, based on personal savings, which would reduce pension pressure on the national budget.

Also read: Brazil: What would happen to the economy with Paulo Guedes as minister?

Bolsonaro also proposes a plan to privatize prisons, something that would surely help reduce public spending, but whose impact could be marginal and inconsequential, since Brazil is the country in Latin America where the lowest percentage of the population is destined.

GDP to prison administration is only 0.06%, according to IDB figures. In addition, in countries such as the United States, the privatization of prisons has been controversial due to the implications it can have when promoting mass incarceration in order to keep them profitable.

While Bolsonaro has admitted that he knows nothing about economics, these proposals have all the marks of what would be his advisor on these issues, the economist Pablo Guedes. Guedes is a doctrinaire of the Chicago school, a confirmed neoliberal.

Neoliberalism can be criticized a lot, but nobody can deny its success when it comes to reducing public spending, the size of the state, and reducing the state deficit.

While Bolsonaro is a threat to the freedoms of millions of Brazilians, particularly sexual minorities, women and ex-convicts, his success this weekend may stem from his attention to one of the most serious concerns of the regular Brazilian: What will be my income?

 

LatinAmerican Post | Pedro Bernal

 

* The opinion of the editor does not represent this newspaper

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