Disorder
The government is expected to choose a path that brings economic growth while maintaining fiscal balance, without losing the stability and institutional confidence built up over the years.
A rare moment of hope swept through the financial market. Expectations from all economic analyses were that, faced with the realization of the failure of macroeconomic policy, the government would make a turnaround, restore the Central Bank's status as a guarantor of inflation, and resume a consistent fiscal policy that would eliminate accounting adventures and prevent attempts to manage the economy impulsively, without planning.
What we actually saw was the certainty that the Central Bank will be alone in the mission of controlling inflation, and the promise of interest rate cuts cannot be fulfilled, since the tool to be used to control the inflation rate will be the Selic rate.
A trap of low growth, high inflation, and fiscal mismanagement is the worst-case scenario for a reelection bid in 2014. All this isn't worse only because of the rising employment levels and stable income levels for workers.
Regarding innovative actions in our social accounting, the government now hopes to mitigate the impacts through concessions that boost sectors and accelerate revenue collection.
The discussion about the repercussions of this period in terms of economic management is treated as something ambiguous. For many, myself included, it is a moment of deconstruction of the orthodox foundations established over the years, from FHC to the Henrique Meirelles era. For others, it is a way to innovate in economic treatment, and the cost of this innovation is the sacrifice of public finances.
The current economic apathy is serious. Some institutions have lost credibility, and negative market expectations are growing. It is undeniable that the government is going through a bad period, both economically and in terms of its political maneuvering.
The loud boos received by the President at the opening ceremony of the Confederations Cup are small reflections of the delicate moment the government is going through. Not even the FIFA president's request for Fair Play was accepted as an act of compassion.
To make matters worse, the exchange rate is outside the expectations of federal planners, and its monitoring has become a central concern. Dilma's recent speeches, reaffirming total control over economic agents, only confirm her discomfort with the criticism she has received.
If there is an economic recovery in the second half of the year, Dilma Rousseff will have been a key guarantor of the innovative approach to managing the national economy, as she participated very directly in all actions. Thus, she will be able to reap the rewards of that decision.
The window for change in economic management is now, before we turn the corner into the second half of the year, because the results of changes made now will only be felt at the end of 2013 or the beginning of 2014. If the current choices are maintained and take a tortuous path, the burden of the economic downturn could hinder the political projects of 2014.
If the results for the second half of the year are not positive, the federal government will have to admit its lack of control, and the fiscal targets will already be clearly at risk of being missed, as the recovery period will have expired.
To complicate the scenario for the Brazilian economic recovery, countries like the US and Germany are not in their best institutional moments. On the Washington side, Obama is suffering severe setbacks due to his handling of fiscal policy and the Fed's ineptitude in managing the economic crisis. As a solution for the US economy, the government is flirting with IMF support to try and boost its demands.
The resigned Angela Merkel maintains her strategy of rebuilding her image, which has been severely damaged by her vehement defense of spending cuts across Europe. It seems to me that Merkel is focusing on her economy, her standing with the electorate, and changes in German consumer confidence in the economy.
Finally, it is expected that the government will choose a path that brings economic growth, but that maintains national fiscal balance, without losing the stability and institutional confidence built up over the years. It is important to maintain the modernization actions of the State, bringing together private and public forces in national development.