Public debt: rentiers profit, investments fall and the account does not close
In March, the government announced that Brazil's public debt had increased by 1,51%, exceeding R$ 3,6 trillion, according to official data; public debt has long ceased to be a mechanism for public investment and has become a tool of interest to rent-seekers, in the catastrophic policies of Henrique Meirelles.
From Brasil de Fato - In March, the coup government of Michel Temer (MDB) announced that Brazil's public debt had increased by 1,51%, exceeding R$ 3,6 trillion, according to official data.
Economics textbooks teach that public debt can be a positive tool to boost public investment for job creation, infrastructure projects, and social programs related to health, education, etc. But in the Brazilian case, it has long ceased to be a mechanism for public investment and has become a tool of rent-seeking interest, as explained by Maria Lúcia Fatorelli, a retired auditor from the Federal Revenue Service and founder of the Citizen Debt Audit movement.
“If we look at 2015, which was the year the crisis deepened, the debt stock grew by R$ 732 billion. When you look at the investment that year, it was less than R$ 10 billion. And what was done with all that money? Interest payments.”
In other words, instead of selling Treasury bonds to secure resources that would be invested in health, education, and infrastructure, for example, the government has been issuing these bonds solely to pay the interest on its own debt. According to Maria Lúcia, this practice violates Article 167 of the Constitution, which defines transparency criteria for carrying out this type of financial operation.
Robin Hood in reverse
According to economist and professor at the University of Campinas (Unicamp), Pedro Rossi, the problem is not the size of the debt, but the high interest rates paid to creditors. "The Brazilian problem is the interest on the public debt, which is very high, generating a perverse effect that I call a Brazilian Robin Hood effect, that is, it takes resources away from the population to pay interest on the debt."
This opinion is shared by Márcio Pochmann, an economist at the Perseu Abramo Foundation. “The practice of high interest rates ends up with a portion of the public budget being allocated to paying so-called rentiers. Around 6% of everything the country produces, that is, of the GDP [Gross Domestic Product], is spent unproductively, paying interest on the debt.”
Pochmann highlights the similarity between the current economic policy of favoring rent-seeking and the neoliberal period of the 1990s, during the governments of Fernando Henrique Cardoso (PSDB, 1995-2002), when public debt reached over 70% of the national GDP.
“There is a similarity between what happened in the 90s, especially during the FHC government, and what we have been experiencing since the coup in 2016, which is precisely the rhetoric of combating public spending, 'waste,' that is, a problem of fiscal austerity. In the 90s, we had not only privatizations, the sale of national assets that generated revenue, but also an increase in the tax burden and, on the other hand, cuts in public spending.”
In the hands of the banks
Maria Lúcia also points out that, in addition to being a perverse policy of income transfer through the payment of debt interest, it has been used as an argument for taking unpopular measures, such as privatizations or the withdrawal of rights.
"What has always been behind this pension reform, for example, is reducing the volume of resources allocated to social security so that more is left over for interest payments. That's what's behind it. The relationship between this reform and the debt is direct. This has also been the justification for privatizations. Everything we privatize, the resources are destined for the public debt."
But ultimately, who benefits from the debt incurred by the government? Maria Lúcia explains that data on debt creditors is confidential in Brazil, which violates Article 37 of the Federal Constitution, which mandates transparency in public acts. However, according to her, it is possible to identify these creditors based on the economic groups to which they belong.
“We know, for example, that banks hold almost half of the debt. Investment funds and national and foreign pension funds each own about 18%. Direct Treasury bonds, which are the ones any of us can buy, don't even represent 1% of debt holders. So the majority is held by the banks themselves,” he states.
Maria Lúcia argues for a citizen audit to identify illegalities in issued bonds and discrepancies between the amount collected and interest paid.
“For 18 years we have been disseminating this debt data, calling on the population to become aware of it. Because the only way for this audit to be as we want it, which is to truly bring to light the truth, the interpretation of this data, is through the participation of the public. The audit we want is a citizen audit, with popular participation. That is why we are making such an effort to popularize knowledge about this issue.”
According to data from the International Monetary Fund (IMF), Brazil's public debt is expected to exceed 87% of GDP in 2018, placing the country among the highest levels of indebtedness in Latin America.
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