Journalist dismisses risk of "Argentina-ization of Brazil"

247 – Estadão journalist Suely Caldas says that Brazil will not follow in Argentina's footsteps, which manipulated fiscal results to secure investments. According to her, Cristina's actions are far more disastrous because they denote desperation. Read more:

Dilma, Cristina and the 'Orloff effect'

When analyzing the federal government's public accounts, the Federal Court of Accounts (TCU) warned of the risk of "Argentinization of" the country.

"Brazil," referring to the tricks and manipulations that the Dilma Rousseff government has resorted to in order to manipulate the country's fiscal results. In Argentina, social statistics and economic indicators have been discredited and demoralized since the government intervened in the National Institute of Statistics and Censuses (INDEC), dismissed serious professionals, and began to manipulate economic research and indices. The disconnect from reality is such that the official inflation rate in 2012 was 10,8%, while the real rate was 26,9%.

The TCU's warning is reminiscent of the "Orloff effect" phenomenon in Brazil-Argentina relations. In the 1980s, a TV commercial in Brazil showed two men - one drinking a shot of vodka and the other sober and healthy, responding to the first: "I am you tomorrow."

The advertisement's objective was to warn that quality drinks don't cause hangovers. But Brazilian economists quickly reversed the idea and began to call the mistakes made by Argentina and later repeated in Brazil in dealing with hyperinflation the "Orloff effect." According to the TCU (Brazilian Federal Court of Accounts), is Brazil beginning to practice the "Orloff effect"?

It's not quite that far. Here, it would be unthinkable to destroy almost 80 years of work by the Brazilian Institute of Geography and Statistics (IBGE), transforming it into a servile, dishonest, deceitful, and disrespected institution worldwide, as is the Argentine Indec today.

Forced to work with official indices produced by national governments, the International Monetary Fund (IMF) has even threatened to suspend Argentina if it continues to falsify statistics.

It is true that the outlandish tricks employed by the Ministry of Finance to meet fiscal targets discredit our accounting, dragging down public banks and state-owned companies, which the government uses as mere instruments of manipulation.

And they end up producing the opposite effect to what was intended because only the government, and no one else, believes that the 2012 target was met, and neither will the 2013 target be. Banks, investment funds, financial institutions, and consultancies calculate their own numbers, already discounting the camouflage, and it is with these figures that they work.

In other words, besides producing a discredited result, the act of attempting to falsify contributes to fueling the climate of distrust regarding the Brazilian economy, already battered by the strange combination of high inflation and mediocre growth. And this is a bad scenario for a country that needs to attract private investment.

But there is a fundamental difference: while Argentina resolves the failure to meet targets and commitments with blatant falsifications, authoritarian gestures, and disrespect for the rules of democracy, intervening and dismissing honest employees of the National Institute of Statistics and Censuses (INDEC), the Brazilian government does not dare to do the same with the Brazilian Institute of Geography and Statistics (IBGE). And the financial triangulations – criticized and contested – that it makes with Banco do Brasil, the National Bank for Economic and Social Development (BNDES), Petrobras, and Eletrobras may even disappear from the net debt, but they inevitably appear and inflate the gross debt. And the government does not hide this.

In the exchange

It is also true that Brazil is beginning to face problems in the exchange rate area that Argentina has been experiencing for some time, since 2011. However, there is another difference in Brazil's favor: so far, the country has not lost foreign exchange reserves, and the devaluation of the real against the dollar has not been more severe than what other currencies have faced since the Federal Reserve announced the withdrawal of stimulus to the US economy. Despite this, the flight of capital by foreign investors is worrying: R$ 4,073 billion left the Bovespa stock exchange alone last month. And the main explanation is the distrust in the direction of the economy, in addition to the disaster with the shares of the companies of the X Group, owned by Eike Batista.

Meanwhile, neighboring Argentina has been dangerously losing reserves since October 2011, when the government began implementing exchange control measures. This year alone, the loss has reached US$5,242 billion, and between 2010 and last month, the stock of reserves plummeted from over US$50 billion to US$38 billion. And how did President Cristina Kirchner react? On Monday, she announced an amnesty for those who evaded exchange controls: for the next 90 days, anyone repatriating or legalizing dollars kept at home or in bank vaults can do so without paying any fees or taxes: the citizen hands over the undeclared dollars to any bank and receives in return government-guaranteed documents. Argentine economists predict that the amnesty will transform the country into a temporary haven for money laundering.

Despite the differences (in favor of the Brazilian), there is a similarity between Dilma and Cristina: how both like to intervene in the economy! And with enormous chances of making mistakes. An example in Brazil was the program to renew electricity concessions and reduce electricity bills: it strangled Eletrobrás and is being undone by the adjustments granted to the companies' tariffs. Furthermore, the rigidity of the auction models delayed investments in highways, railways, and airports, which are fundamental to alleviating bottlenecks in the country's industrial production. But Cristina Kirchner does much worse.

With inflation spiraling out of control, she decreed a price freeze on food in supermarkets in February. It was supposed to be temporary, but she has already renewed it twice and, on Thursday, closed four supermarkets for "disrespecting the price freeze." She created a law mandating popular vote elections for the Council of the Judiciary, directly intervening in the Judiciary. Fortunately, Judge Maria de Cubría declared the law unconstitutional because it "suppresses the necessary political independence of judges." Without consistent government programs, both are constantly putting out fires, evidently with more mistakes than successes. But Cristina's actions are far more disastrous because they denote desperation. Therefore, dear reader, for now we are free from the "Orloff effect" and let's hope it stays that way.