Fernando Alcoforado*
Brazil has always lacked rational decisions in the economy by the government throughout history. Brazil has always been characterized by the economic irrationality of its governments from the colonial period to the Republican until 1929 when they adopted the agro-export economic model dependent on external markets, when they promoted the industrialization of the Country with a delay of 200 years in relation to the 1st Industrial Revolution in England, when they abandoned the national developmentalist model adopted by Getúlio Vargas government in replacing it with the model of capitalist development dependent on foreign capital and technology from the Juscelino Kubitschek government to the Jose Sarney government and when they adopted the neoliberal model with the subordination of the national economy to globalized capitalism from the Fernando Collor government in 1990 until the present moment. The rational decision of the government in the economy must be oriented towards choosing the options that imply the greatest benefit to society, a fact that has not been occurring throughout the history of Brazil. Sadly, the Bolsonaro administration is irrational, too, because its focus has been on dealing with issues that have no immediate effect on the Brazilian economy, such as Security Social reform which is falsely placed as essential to balance the public accounts and reactivate the Brazilian economy.
The Bolsonaro government does not act rationally because it does not adopt any strategy that effectively contributes to: 1) promote the resumption of the country’s economic growth; 2) to face the ongoing trade war in the world economy; and 3) to take measures to prevent the country from suffering the consequences of the inevitable worldwide explosion of the world debt that could occur at any moment. The government’s number 1 priority should be to promote the resumption of economic growth by reactivating the economy that has been in recession for four years and rapidly reduce the public deficit and unemployment levels. Government’s priority number 2 should be to reduce Brazil’s dependence on exports by promoting the country’s development with an emphasis on the domestic market to minimize the effects of the ongoing trade war of the world economy over Brazil. The government’s priority number 3 would be to strengthen the Brazilian economy that could be affected by the ongoing trade war in the world economy and by the inevitable explosion of world debt due to the fact that Brazil has an economic system extremely weakened by the crisis that broke out in 2014 and, also, for having adopted since 1990 the neoliberal economic model that made it more vulnerable to the impacts of global economic crises.
In order to reactivate economic growth, to face the current commercial war in the world economy and prevent the country from suffering the consequences of the inevitable explosion of the world debt, we must replace the neoliberal economic model that has devastated the Brazilian economy since 1990 and, above all, after 2014, by the national developmentalist model of selective opening of the Brazilian economy whose economic policy should have the characteristics described below:
1) Elaboration of a program of works on economic infrastructure (energy, transport and communications) and social infrastructure (education, health, housing, basic sanitation and environment)
2) Implementation of public / private partnership in the execution of economic and social infrastructure works
3) Elaboration of an industrial development program to substitute imports to meet the domestic market and exports to reactivate the Brazilian economy
4) Elaboration of a program of scientific and technological development centered on the industrial policy that encourages the development of industries that substitute imports and export expansion
5) Raising public savings by increasing public revenues and reducing government costs so that it has the resources to invest in economic and social infrastructure
6) Increase in public revenues by taxing large fortunes, dividends from individuals and banks
7) Reduction of government costs by reducing public debt amortization costs, elimination of superfluous expenses in all the powers of the Republic, and reduction of public agencies and commissioned personnel
8) Immediate adoption of a public debt audit followed by renegotiation of the payment of interest on the country’s domestic public debt in order to reduce the burden and raising public saving for investment
9) Drastic reduction of bank interest rates to encourage private investment in economic and social infrastructure works, industry and the economy in general
In addition, the federal government should adopt the measures described below:
1) Selective import of raw materials and essential products from abroad to reduce the country’s foreign exchange expenditures
2) Adoption of the fixed exchange rate policy in place of the floating exchange rate in force to protect the domestic industry and control inflation
3) Reintroduction of the market reserve in areas considered strategic for national development
4) Nationalize privatized state enterprises considered strategic for national development
5) Increase in public and private savings in order to raise the investment rates of the Brazilian economy
6) Realization of foreign investments, preferably in the export-oriented areas, and in those in which domestic companies are unable to supply the domestic market
7) Maximization of Brazilian exports to expand the country’s foreign exchange earnings and boost the growth of the national economy
8) Control of the inflow and outflow of capital to avoid currency evasion and restrict the access of speculative capital in the country in order to reduce Brazil’s external vulnerability
9) Concession of tax incentives to attract private investments in less developed regions of Brazil
10) Encouraging and strengthening research and development activities and the country’s education system
11) Reduction of social inequalities, including the adoption of programs that contribute to the basic needs of the population in terms of food, clothing, housing, health services and employment, and a better quality of life
This whole set of measures should be put into practice based on the planning of the national economy that would ensure economic growth and the development of the country on a sustainable basis. It is important to note that Brazil’s largest economic leverage continues to be the infrastructure sector. There is a need for Brazil to invest R$ 2.5 trillion in infrastructure. According to the Institute of Logistics and Supply Chain, the necessary investments in Brazil in ports (R$ 42.9 billion), railroads (R$ 130.8 billion) and highways (R$ 811.7 billion) total R$ 985.4 billion. Adding this value to the investments required for 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 million, basic sanitation (R$ 270 billion) and telecommunications (R$ 19.7 billion) totaled R$ 1,664.5 billion. The education sector requires investments of R$ 83 billion per year, health R$ 54 billion per year and the popular housing requires R$ 68 billion to eliminate the housing deficit. Adding the total investment required in economic infrastructure (energy, transportation and communications) and social infrastructure (education, health, sanitation and housing) would total R$ 1,869.5 billion, that is, almost R$ 2 trillion. The economic and social infrastructure program to be adopted in the short term should achieve these goals.
Instead of adopting the measures described above, the Bolsonaro government places the Social Security reform as essential to reactivate the Brazilian economy, with the support of big businessmen who hope to reduce their costs with their contribution to Social Security and the bankers who hope to make money with the proposed capitalization of Social Security. Without the adoption of the measures described above, Brazil will move towards inevitable economic and social ruin with serious repercussions of a political nature. In order to make the Bolsonaro government reverse its irrational neoliberal economic policy, it is necessary that the Brazilian people mobilize through their representatives in the Parliament and their Civil Society organizations to demand the adoption of the measures described above in defense of economic progress of the country and the well-being of the Brazilian population.
* Fernando Alcoforado, 79, holder of the CONFEA / CREA System Medal of Engineering Merit, 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 14 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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