Fernando Alcoforado *
The neoliberal economic model implemented in 1990 is largely responsible for bringing Brazil into economic bankruptcy and social devastation today. The practice has demonstrated the unfeasibility of the neoliberal economic model in Brazil inaugurated by President Fernando Collor in 1990 and maintained by Presidents Itamar Franco, Fernando Henrique Cardoso, Lula, Dilma Roussef and Michel Temer. The current economic recession, the sharp deindustrialization of the country, the insolvency of the Union, states and municipalities, the excessive increase of the federal public debt, widespread bankruptcy of companies and mass unemployment demonstrate the unfeasibility of the neoliberal model implanted in the country. To overcome the crisis in which Brazil is debating, the Michel Temer government has adopted measures aimed at finding the balance of public accounts with PEC 241 to deal with the insolvency of the Union and then to continue the failure neoliberal economic model. It is an irrationality to try to keep the failed neoliberal economic model when it should restructure the Brazilian economy on new bases.
The neoliberal economic model should be replaced in Brazil by the national economic development model of selective opening of the Brazilian economy that should contemplate the adoption of an economic policy that immediately prioritize: 1) the sharp reduction of interest rates to encourage investments in productive activities ; and 2) the retaking of development by investing R$ 2 trillion in economic infrastructure (ports – R$ 42.9 billion, railways – R$ 130.8 billion, highways – R$ 811.7 billion, waterways and river ports – R$ 10.9 billion, airports – R$ 9.3 billion, electric sector – R$ 293.9 billion, oil and gas – R$ 75.3 billion, basic sanitation – R$ 270 billion and telecommunications – R$ 19, 7 billion) and social (health sector – R$ 83 billion / year, education sector – R$ 16.9 billion / year and the popular housing sector – R$ 160 billion) through a public-private partnership.
Only in this way will it be possible for Brazil to grow economically at high rates and to overcome the current mass unemployment that reaches the record level of 27.7 million workers, according to the IBGE PNAD survey. Nicola Pamplona published in Folha de S. Paulo on 5/17/2018, under the title Falta trabalho para 27,7 milhões de pessoas, diz IBGE (Missing work for 27.7 million people, says IBGE), available on the website <https: // www1-hoja-uol-com- br.cdn.ampproject.org/c/s/www1.folha.uol.com.br/amp/mercado/2018/05/falta-trabalho-para-277-milhoes-de-people-diz-ibge.shtml>, presents the information that the under-utilization rate of the workforce, which includes the unemployed, people who would like to work more, and those who gave up looking for work, hit a record in the first quarter, reaching 24.7 percent. In all, there are 27.7 million people in these conditions, the largest contingent since the beginning of the historical series in 2012. Of these, 13.7 million have sought employment, but have not found. The rest are underemployed because of insufficient hours worked, people who would like to work, but did not seek employment or gave up looking for work.
Besides making the situation of the country socially unsustainable with the underutilization of the current labor force, the floating exchange rate policy imposed by the neoliberal model will further aggravate the Brazilian economy with the strong upward trend of the dollar that may occur due to increase in inflation in the United States that will cause the Federal Reserve to raise interest rates. Higher interest rates in the United States attract resources now invested in other countries, including Brazil. With fewer dollars in circulation in Brazil, the dollar’s price tends to rise. To compete with the United States in attracting dollars, the Brazilian government would have to raise interest rates on government bonds that are fixed income assets issued by the National Treasury to finance Brazil’s public debt. The consequence of this policy will be the highest increase in Brazil’s huge public debt.
About exchange rate policy, it should be noted that the exchange rate is crucial for the growth of an economy. It should be noted that one of the policies that leveraged China’s exports was the fixed exchange rate determined by the government in the light of national interests. It is important to note that with a floating exchange rate tied to foreign exchange bands, as Brazil does, the Central Bank must daily intervene in the foreign exchange market to make the dollar close to the quotation determined by the Central Bank. The option for an exchange rate tied to foreign exchange bands is expensive because this regime does not inspire confidence in international investors – as a devaluation can occur at any time – and given the continuing need to always draw dollars to keep international reserves at a minimum comfortable, interest rates have to be very high, contributing to raising public debt that tends to become explosive.
In view of the above, it is urgent to adopt the national economic model of development of a selective opening of the Brazilian economy that would allow Brazil to assume the direction of its destiny, unlike the neoliberal model that makes the future of the country dictated by the forces of the market all of them committed to international capital. The adoption of the national economic development model of selective opening of the Brazilian economy would require the adoption of the measures described below:
- To break with the neoliberal model to bar the denationalization of the Brazilian economy, to reverse the deindustrialization of the Brazilian economy and to raise and sustain Brazil’s economic growth.
- Make the selective importation of raw materials and essential products from abroad to reduce the country’s foreign exchange expenditures.
- Increase public and private savings in order to raise the investment rates of the Brazilian economy.
- Drastically reduce bank interest rates or bank spread to encourage investment in productive activities and create the conditions to raise private savings and investment rates in Brazil to promote sustained economic growth in Brazil.
- To make foreign investments preferentially in the export-oriented areas and in those in which domestic companies are not able to supply the domestic market.
- Transform Brazil into an export platform.
- Maximize Brazilian exports to expand the country’s foreign exchange earnings and boost the growth of the national economy.
- Adopt the fixed exchange rate policy in place of the floating exchange rate in force to protect the domestic industry and control inflation.
- Control the inflow and outflow of capital to avoid currency evasion and restrict the access of speculative capital in the country.
- Audit public domestic debt, renegotiate with public debt creditors the lengthening of interest payments, and keep the Selic rate low to reverse the bursting trend of domestic public debt.
- Renegotiate with domestic public debt creditors the lengthening of interest payments, raising taxes on the financial system and taxing large fortunes for the Brazilian government to overcome the fiscal crisis and to have the resources to raise the rate of public investment in the deficient economic and social infrastructure of Brazil.
- Drastically reduce public expenditure on federal, state and municipal governments and the legislative and judicial powers.
- Create regional development structures integrating federal, state and municipal governments to rationalize public sector actions and provide fiscal incentives to reduce imbalances in regional development.
- Provide tax incentives to attract private investment in less developed regions of Brazil.
- Encourage and reinforce research and development activities and the country’s education system.
- Reduce social inequalities by contemplating the adoption of measures that contribute to meeting the needs of the population.
- Adopt measures that contribute to overcome the environmental problems of Brazil.
* Fernando Alcoforado, 78, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is the author of 13 books addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific, Economic, and Social Revolutions that Changed the World.
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