Inequality, unemployment, and violence: this is what the country of Meirelles' fiscal adjustment is like.

1. The economic program of Mr. Henrique Meirelles, the current Minister of Finance; former president of BankBoston between 1996 and 1999 and of FleetBoston Financial; former president of the Central Bank from 2003 to 2010, and, between 2012 and 2016, chairman of the board of directors of the J&F holding company, owned by Joesley Batista, is the program of the Market.

2. It is the program ardently desired (and promoted with resources) by bankers, rentiers, large commercial and industrial entrepreneurs, large rural landowners, owners of major media outlets, managers of large fortunes, executives of large companies and their representatives in Congress.

3. The Market can be defined as being comprised of approximately 200 people who voluntarily declare, when filing their annual income tax returns, that they have monthly incomes exceeding 80 minimum wages (approximately R$ 80.000 per month).

4. The members of this entity, created and called "Market" by the media and academia, number less than 0,2% of the adult Brazilian population (approximately 120 million individuals) and are confronted with the remaining 207 million individuals, who represent more than 99% of the Brazilian people. Among the 26 million Brazilians who, according to the law, must file income and asset declarations, they represent less than 1% of income tax filers. 

5. Meirelles' Reform Program is in reality a series of counter-reforms that promote economic and social regression to the period before 1930. These counter-reforms, which the overwhelming majority of the people reject, are a program relentlessly imposed on Brazil, being, in reality, the (anachronistic) execution of the policies recommended by the Washington Consensus.

6. The Washington Consensus is a list of ten policies compiled by experts from the International Monetary Fund (IMF), the World Bank, the United States Treasury Department, and American academics, as being the most appropriate (and even the only) policies capable of promoting the development of underdeveloped countries, such as Brazil.

7. This Consensus, dating from 1989, revisits the principles of classical economic theory and policy from the gold standard era and before J.M. Keynes, at a time in American economic policy characterized by the success of its efforts to open markets, deregulate finance, and promote globalization; and in foreign policy, due to its victory against Iraq in the first Gulf War and the collapse of the Soviet Union, the greatest political and military victory in which not a single bullet was fired.

8. The application of the Washington Consensus policies, required by the IMF and World Bank's "conditionalities" for granting loans and by the provisions of free trade agreements, a version of the "unequal agreements" of the 19th century, did not lead to the development of Latin American and African countries.

9. The gap, in terms of per capita income, share of world product and world trade, number of patents registered, etc., between highly developed countries and underdeveloped countries (which should not include China) has not narrowed between 1989, the date of the Consensus, and the present day.

10. From a structural point of view, these countries continued to be characterized as producers/exporters of raw materials and importers of industrial products, exhibiting serious disparities and poverty, and low or no technological dynamism.

11. The countries that developed and grew rapidly after 1989 were those that did not follow these Consensus policies (always advocated by the United States, economic organizations, and developed countries), with particular emphasis on China, and to some extent India.

12. The implementation of Mr. Henrique Meirelles' Program is carried out with the collaboration of Mr. Ilan Goldfajn, president of the Central Bank, and Mr. Dyogo Oliveira, Minister of Planning, and the technicians who work at the Treasury, the Central Bank, and the Ministry of Planning, who are referred to as the "economic team".

13. The Reform Program implemented by Henrique Meirelles and his aides, with the help of the National Congress, is the implementation, in Brazil, of the Washington Consensus.

14. The policies of the Washington Consensus and the H. Meirelles Program are ten:

fiscal discipline;

reduction in public spending;

tax reform;

market interest;

market exchange;

commercial opening;

elimination of restrictions on foreign direct investment;

privatization of state enterprises;

deregulation ;

right to intellectual property.

15. The fiscal discipline, first principle of Consensus, that It signifies an effort to promote a rigorous balance between public revenues and expenditures, eliminates the possibility of state indebtedness, and facilitates counter-cyclical policies, combats unemployment and underemployment, and carries out the structural investments essential for a country's sustainable development.

16. Fiscal discipline, a central point of Meirelles' Program, is imposed by Constitutional Amendment 95, which freezes “primary” expenditures for 20 years, without touching the State’s expenditure on public debt, which amounts to almost 50% of the total budget and public spending, without allowing for an increase in revenues, rejecting the fight against tax evasion and to the evasion of foreign exchange, and, implicitly, denying the possibility of tax increases and tax reform.

17. The second principle of Consensus, which is the reduction in public spending, means the reduction of primary expenditures on State activities in public security, justice, defense; in social programs such as education and public health; with the Assistance and Public Welfare; with infrastructure investments etc.

18. H. Meirelles does not consider reducing state spending on servicing and amortizing public debt, which accounts for more than 50% of the budget, resulting from the extraordinary levels, in international terms, of the benchmark interest rate set by the Central Bank (the Selic rate), nor does he consider controlling the revenue that the financial sector earns from the practice of extremely high interest rates that inhibit consumer spending and business investment.

19. The policy of reducing state spending is pursued through the same Constitutional Amendment 95 that froze primary expenditures at the level of expenditures made in 2017 for twenty years, that is, until 2037.

20. Some consequences of reducing public spending (or privatizing public programs) are as follows:

reduction of Bolsa Família, which currently serves 25% of the population, which will result in an increase in absolute poverty;

reduction of care for children in early childhood;

reduction of the SUS and worsening of the health situation of the mass of poor citizens, unable to pay for medicine and medical assistance;

reduction of investments in education and its privatization, which will exclude the poor from access to education;

Reducing investments in defense, which are necessary for a deterrent policy essential to a country with the geographic, population, and economic dimensions of Brazil;

reduction of investments in science and technology.

21. The third principle, the tax reformThe approach advocated by the Washington Consensus does not mean reforming the tax system to make it less regressive, that is, less burdensome on the poorest, but rather reducing taxes on capital and corporate social security contributions in order to, by increasing the prospect of corporate profits, achieve the goal of stimulating private investment.

22. This seems to be the intention of the Ministry of Finance and Meirelles, the main architect of the Temer government's economic policy, as can be seen from the government's discreet pronouncements on the subject.

23. Henrique Meirelles's reluctance to review tax exemptions and collect the Union's outstanding debt, which exceeds R$ 1,8 trillion, and the debts of private companies to Social Security, which reach more than R$ 400 billion; the debt refinancing programs (Refis) that are, in reality, debt forgiveness programs; the tolerance of decisions by the Administrative Council of the Federal Revenue (Carf) in favor of large companies and against the State; the tolerance of capital flight abroad – all these factors, taken together, reveal the nature of the tax reform that Meirelles is, in practice, carrying out for the benefit of capital and against labor.

24. The practice of market interest, The fourth recommendation of the Washington Consensus means that the State should not implement subsidized interest rate policies to stimulate and strengthen domestically owned companies in their internal and international competition with multinational mega-corporations that, in addition to the resources of their treasuries, have easy access to financing from state public banks and multinational private mega-banks.

25. Meirelles' policy of replacing the TJLP, the long-term interest rate charged by BNDES on loans to companies (not only national but also foreign), with the TLP, a long-term rate that will bring the interest charged by BNDES closer to market interest rates, a rate that will be floating, is one of the instruments of the privatization policy of Brazilian public banks, in the case of BNDES, and also aims to benefit foreign companies operating in Brazil and force Brazilian companies to finance themselves with private banks that practice interest rates (to companies) that exceed 30% per year, rates that make any productive investment unfeasible.

26. The Washington Consensus recommends, fifthly, that developing countries adopt a market exchange policy, that is, that the State does not interfere in any way in the foreign exchange market and that it does not control in any way the inflows and outflows of capital from the economy and, therefore, allows the intense speculation that exists in the world foreign exchange market.

27. The Ministry of Finance and the Central Bank are implementing a policy of an overvalued exchange rate, that is, the real has a value in relation to the dollar that is much higher than would be convenient to promote industrial development and the necessary private investments. This policy hinders Brazilian exports, floods the domestic market with imports of cheap industrial products (especially from China, but not only from China), stimulates spending on tourism, etc., and denationalizes Brazilian industry, which, increasingly weakened, is gradually sold off at "very good" prices, according to experts in selling Brazil.

28. The exchange rate policy favors the appreciation of the real, with the goal of using high interest rates to attract foreign capital for speculative investments.

29. The commercial openingThis is the sixth policy recommended by the Washington Consensus, which enshrines the international division of labor between primary and industrial countries. Meirelles' objective is to ensure that foreign industrial products enter Brazil freely, even in cases of dumping.

30. The consequences of this opening policy can be seen in the trade deficits in industrial products with highly industrialized countries and China; in the lack of regulation of agricultural exports, which are highly favored by the government's credit policy (benefiting countries that import Brazilian primary products); in the decision to eliminate access to preferential credit for companies established in Brazil that was granted by the BNDES; in the elimination of the national content policy; and in the weak defense of Brazilian policies denounced at the World Trade Organization (WTO) by industrial exporting countries seeking to prevent the emergence of competitors, while in Brazil the mantra of competitiveness and productivity is endlessly repeated—in reality, arguments to promote the reduction of wages and benefits for workers.

31. Henrique Meirelles intends to consolidate his neoliberal program through Brazil's accession to the Organization for Economic Cooperation and Development (OECD), which brings together the world's most developed countries to articulate common positions in negotiations and international organizations, without consulting society or the National Congress, thus restricting (lock in) all of its ultra-neoliberal policies, making any eventual revision, even if it proves indispensable due to the development needs of a country with Brazil's characteristics, more difficult, since such a revision would contradict "international commitments".

32. Meirelles' policy also aims to promote, at any cost, a free trade agreement with the European Union, which will lead to the signing of free trade agreements with the United States, China, Japan and other countries, and will eliminate any possibility of industrial development in Brazil due to the elimination of its main instrument, which is tariff policy.

33. These agreements will mean the end of Mercosur's common external tariff and, therefore, the end of all regional integration policies and the formation of a South American bloc.

34. The seventh principle of the Washington Consensus, which determines that elimination of restrictions on foreign direct investment, This has been put into practice especially through the market exchange rate policy; the privatization and denationalization of state-owned companies, without any strategic precautions, as occurs in developed countries in relation to sectors such as electricity, ports and media; the opening of the exploration of pre-salt reserves to foreign mega-oil companies; the policy of fragmentation and sale of Petrobras complex companies to multinational oil companies; and the end of the national content policy.

35. Other government policies favoring foreign capital include opening up service sectors such as health and education; selling land to foreigners; environmental deregulation; and opening forest reserves to economic exploitation, especially mining.

36. Operation Lava Jato contributed significantly to creating a public image of Petrobras as a corrupt and inefficient company, through the constant dissemination to the press of plea bargain testimonies involving company executives and politicians, despite its production capacity and technological leadership in the oil sector.

37. In reality, the objective of Meirelles' policy is to reduce the State to a minimum, eliminating its competence and function of regulating and overseeing economic activity (including the tax system) and investing, and transferring all economic activity to private companies, but especially to foreign companies, promoting a broad process of denationalization of the economy that occurs, in parallel, with the elimination of any support for companies with national capital.

38. Implementing the eighth principle of the Washington Consensus, which recommends that privatization of state enterprises, It was announced in the Investment Partnership Program (PPI) from the beginning of the Temer government and has now accelerated with the political crisis and the fiscal imbalance aggravated by the need to articulate political support in Congress to prevent the approval of the opening of the investigation process against President Michel Temer and to compensate for the constant drop in tax revenue, due to the economic recession caused by the very recessionary policy that Henrique Meirelles provokes by rigorously executing the policies recommended by the Washington Consensus and the Market.

39. Now, the privatization of 57 companies has been announced, including Eletrobras, the Mint, and major airports, and the Petrobras divestment program, executed by Pedro Parente, continues discreetly. This program will transform Petrobras, a large, integrated, and highly competitive oil company on the international stage, into a small oil exporting company, primarily exporting to the United States.

40. Henrique Meirelles is committed to privatizing public banks, as revealed by Ilan Goldfajn, president of the Central Bank, when he said in a press interview that the “high interest rates” (or the spread) in the Brazilian market resulted from the lack of competition in the financial sector, which should be open to foreign banks.

41. The policy of deregulation It's the ninth policy. Sponsored by the Washington Consensus, this means, at a minimum, the loosening of economic and labor legislation.

42. The Market Economic Program, implemented by Henrique Meirelles, strictly follows this Consensus recommendation in all sectors of economic activity, starting with labor reform, with the reduction of the powers of unions; the weakening of the Labor Courts and their oversight; the prevalence of negotiated agreements over legislation; outsourcing in all company activities; intermittent work schedules; the possibility of mass layoffs; the end of the union tax, while maintaining the "S" system of employers' associations; the expansion of temporary contracts; and the end of the work permit.

43. The reform of the Public Pension System will mean, due to the migration of wealthier contributors and even the poorest, who will realize the futility of contributing due to the new retirement deadlines and requirements, the privatization and end of the pension system in Brazil for the poorest, whose income will not allow them to pay for private pension plans.

44. In the environmental area, flexibility is achieved by transferring the authority to determine environmental reserves from the Union to the States; by reducing the requirements for environmental impact reports; and by making the use of pesticides more flexible.  

45. The entire program of privatization (and denationalization) of state-owned enterprises also corresponds to a broad deregulation of economic activity to the benefit of private companies, but not of workers.

46. ​​The weakening of economic regulation will be exacerbated by the reduction in state oversight activities resulting from the atrophy of regulatory bodies due to budget and personnel cuts.    

47. The tenth recommendation of the Washington Consensus concerns intellectual property protection through legislation that is more favorable to patent and trademark holders, who are generally multinational mega-corporations.

48. There is a permanent effort by the Government, through the National Institute of Industrial Property (INPI), to reduce the timeframes for examining patent applications, without establishing any obligation to manufacture in Brazil, which turns the patent into an import monopoly, and a reduction in novelty requirements, coupled with a lack of oversight and significant and increasing remittances of payments abroad for technologies, often obsolete, and for the use of trademarks, which is absurd.

Consequences of the Henrique Meirelles Program

49. The high degree of urbanization in Brazilian society makes the existence and expansion of industry necessary, as it is the dynamic sector of any large, developed economy.

50. The mechanization of large-scale agriculture geared towards export does not create enough jobs and displaces labor from the countryside to the cities, which worsens the situation of the urban population in terms of employment, housing, health, education, etc.

51. The trend towards automation and robotization in the industrial sector, without any policy to address this challenge, means that even with increased production, the creation of industrial jobs is reduced.

52. The lack of an export policy for industrial products, which includes the active participation of foreign companies, and the constant inflow of foreign capital necessary to balance the balance of payments, due to the structural deficit in the current account, creates a prospect of a future exchange rate crisis, despite the significant current reserves.

53. The concentration of income and wealth will tend to deepen continuously, as will other internal disparities and external vulnerabilities. Urban and rural violence will tend to worsen significantly.

54. Those with large fortunes will tend to become absenteeists, that is, they will start residing abroad, as already happens with many of their families and heirs.

55. The economic program of the market implemented by Henrique Meirelles will consolidate Brazil's position as a producer and exporter of primary agricultural and mineral products, especially oil, and as a territory for labor exploitation with the installation of multinational mega-companies to exploit a medium-sized domestic market of about thirty million consumers, but which is larger than the domestic market of many European countries (in number of consumers), these 30 million surrounded by 170 million of a mass of unemployed, underemployed and impoverished people.

* Samuel Pinheiro Guimarães was Secretary General of Itamaraty (2003-2009) and Minister of Strategic Affairs (2009-2010)