Fernando Alcoforado*
Minister of Economy of the Bolsonaro government, Paulo Guedes, announced emergency measures to limit the effects of the coronavirus on the Brazilian economy for the next three months that has three objectives: 1) to protect the most vulnerable part of society; 2) to help companies in difficulties; and, 3) to reinforce investments in health. The total to be invested corresponds to R$ 147.3 with the reallocation of expenses foreseen in the federal government budget and maintaining the spending limit established. Emergency resource releases are as follows:
Most vulnerable population: R$ 83.4 billion
»Anticipation of the two installments of the 13th salary of
INSS retirees and pensioners, for April and May: R$ 46 billion;
»Transfer of amounts not drawn from PIS / Pasep to FGTS, to allow new withdrawals: R$ 21.5 billion;
»Anticipation of the salary bonus for June: R$ 12.8 billion;
»Reinforcement of the Bolsa Família program, with the inclusion of over 1 million beneficiaries: R$ 3.1 billion;
»Reduction of the interest ceiling on the payroll loan, increase in the margin and payment term.
Maintenance of jobs: R$ 59.4 billion
»Postponement of the FGTS payment term for three months: R$ 30 billion;
»Postponement of the Union’s share in Simples Nacional for three months: R$ 22.2 billion;
»Proger / FAT credit for micro and small companies: R$ 5 billion;
»50% reduction in contributions from Sistema S for three months: R$ 2.2 billion;
»Simplification of the requirements for contracting credit and dispensing with documentation for renegotiation;
»Simplification of the clearance of imported industrial raw materials before landing.
Fighting the pandemic: R$ 4.5 billion
»Destination of the DPVAT fund balance to SUS: R$ 4.5 billion;
»Reduction to zero of imports tariffs for products for medical and hospital use (until the end of the year);
»Temporary exemption from IPI for listed imported goods that are necessary to combat Covid-19;
»Suspension of proof of life for INSS beneficiaries for 120 days.
Why is this proposal ineffective? This proposal is ineffective because the neoliberal minister Paulo Guedes avoids adopting the Keynesian solution that is the most correct to face the trend of deepening the recession followed by economic depression that will lead Brazil to generalized bankruptcy of companies, mass unemployment and insolvency federal, state and municipal governments. The Keynesian solution should imply an increase in spending by the federal government to compensate for the steep drop in household consumption and private investment aggravated by the coronavirus and not in maintaining the established spending ceiling. The United States government, for example, intends to allocate US$ 1 trillion to fight the coronavirus in the country.
Keynesian economic doctrine became known as opposition to the liberal theory in force until the 1930s of the 20th century. With the Keynesian economic doctrine, the State should intervene in the economy whenever necessary, in order to avoid the economic downturn and guarantee full employment. According to Keynes, liberal-capitalist theory does not provide mechanisms and tools capable of guaranteeing a country’s employment stability. This fact is proven in Brazil and in the world with the prevailing neoliberalism. Note the fact that Keynesianism was adopted by all governments as one of the fundamental factors for the economic recovery that took place in the world after the world economic depression that broke out with the crash of the New York Stock Exchange in 1929. The Main Characteristics Keynesianism are as follows:
- Defense of state intervention in areas that private companies cannot or do not wish to act
- Opposition to the liberal system
- Reduction in interest rates
- Balance between demand and supply
- Ensuring full employment
- Introduction of social benefits for the low-income population, in order to guarantee minimum support
It is worth noting that, according to the Keynesian model, the Gross Domestic Product (GDP) can be calculated in the currency of a given country from the sum of all its components: GDP = C + I + G + X – M. o face the threat of depression in the Brazilian economy resulting from the current recession and of the impact of the coronavirus based on the Keynesian model, it is essential to promote the expansion of the economy by expanding household consumption (C), the private sector investment rate (I), the State’s expenditure on investments in economic and social infrastructure (G) and export revenue (X) and reduced imports (M). Paulo Guedes’ proposal does not contemplate any of this.
In order to increase household consumption (C), it is necessary to increase the population’s wage bill with the generation of jobs and income and adopt a credit policy that encourages consumers to buy. To raise the level of private sector investments (I), it is necessary to reduce the tax burden, implement a policy of tax incentives and attractive interest for businessmen. In order to increase government expenditure (G), it is necessary to increase the level of investments in economic infrastructure (energy, transport and communications) and social infrastructure (education, health, housing and basic sanitation). Economic growth can also be achieved by raising the level of exports (X) and reducing imports (M) with the policy of substituting imported goods with a view to expanding economic activities. Nothing of this has been the object of the economic action of the Bolsonaro government. In order to reactivate economic growth as quickly as possible, it is necessary to reactivate paralyzed works and elaborate a broad program of economic infrastructure works (energy, transport and communications) and social infrastructure (education, health, housing, basic sanitation and the environment) which, in Brazil, demands resources of the order of R$ 2 trillion. Of these investments in infrastructure, the priority would be with the health sector at this time of expansion of the coronavirus in the country.
To address deficiencies in infrastructure, Brazil should invest R$ 2 trillion according to the Institute of Logistics and Supply Chain. The investments required in Brazil in ports (R$ 42.9 billion), railways (R$ 130.8 billion) and highways (R$ 811.7 billion) total R$ 985.4 billion. Adding this amount to the necessary investments in waterways and river ports (R$ 10.9 billion), airports (R$ 9.3 billion), electricity sector (R$ 293.9 billion), oil and gas (R$ 75.3 billion), basic sanitation (R$ 270 billion) and telecommunications (R$ 19.7 billion) total R$ 1,664.5 billion. The education sector requires investments of R$ 83 billion per year, the health sector R$ 54 billion per year and the popular housing sector requires R$ 68 billion to eliminate the housing deficit. Adding the total investment required in economic infrastructure (energy, transport and communications) with that of social infrastructure (education, health, basic sanitation and housing) would total R$ 1,869.5 billion, that is, almost R$ 2 trillion.
To avoid deepening the recession in the Brazilian economy with the impact of the coronavirus, it is necessary that the federal government allocate R $ 2 trillion needed to invest in economic and social infrastructure and not the scarce resources in the amount of R$ 147.3 billion that are insufficient to face the threat of economic depression in the country and allocate, primarily, R$ 54 billion per year to strengthen the health sector and not the ridiculous R$ 4.5 billion proposed by Minister Paulo Guedes to fight the coronavirus pandemic. Besides that. In addition, the federal government should abandon the spending cap policy that is not justified in a situation in which the lives of the Brazilian population and economy are threatened as never before in the history of Brazil.
* Fernando Alcoforado, 80, awarded the medal of Engineering Merit of the CONFEA / CREA System, 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 author of the books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba, 2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV, Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua convergência (Associação Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro para mudar o mundo (Editora CRV, Curitiba, 2019).
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