Fiscal crisis in Brazil? Only if it's a thing of the past.
Statistical data reveals that the performance of public accounts in Brazil was much worse during the eight years of the FHC government than during the 12 years of Lula and Dilma, whether by the concept of primary result (excluding interest expenses) or nominal result (which includes all expenses); despite this, economists linked to the old regime, such as Pedro Malan and Gustavo Franco, have criticized Guido Mantega's fiscal policy; the question is: do they deserve any credit in this debate?
247 - Pay attention to the image below:
As you can see, this is the headline from Folha de S. Paulo this Wednesday – one of the most alarmist and politically biased editorials ever published in its history. According to the newspaper, "distrust in the Dilma government is causing the dollar to rise sharply."
A less attentive reader might imagine that Brazil was experiencing a new maxi-devaluation, as happened in the 80s. But it was a 2% increase in the American currency, which closed yesterday quoted at R$ 2,29.
According to Folha, the reason would be the deterioration of Brazilian public finances. Anchoring the report is a statement from the unimpeachable Gustavo Franco: "The government reaps what it sows. When there is credibility, small mistakes can be made, but when credibility runs out, any small mistake is a big problem. Fiscal policy is a succession of errors and cover-ups," he said.
For those who don't remember, Gustavo Franco was president of the Central Bank during Fernando Henrique's government and he wasn't content with making small mistakes. To maintain an artificial exchange rate for the real, he burned through more than US$45 billion in reserves, raised interest rates sky-high, coined the expression "bag of evils" to describe the instruments at his disposal, and literally helped lead Brazil to bankruptcy, falling into the lap of the International Monetary Fund.
It is no coincidence that the fiscal figures for the eight years of FHC's government were much worse than those recorded during the 12 years of Lula and Dilma's governments.
247 compiled data on the primary (excluding interest expenses) and nominal (including all expenses) results of the public sector, year by year. Here are the figures for FHC (Fernando Henrique Cardoso): an average primary surplus of 1,5% and a nominal deficit of 5,1%. Now, those for Lula and Dilma: a primary surplus of 3,1% of GDP and a nominal deficit of 3,1% as well. In other words, the comparison – statistically speaking – is quite favorable to the more recent governments.
Given the numbers, was it really the loss of confidence in Dilma's government that caused the dollar to rise yesterday? Note: this Wednesday, the American currency fell and closed at R$ 2,28. Have confidence returned?