Meirelles preaches "theory of independence"

247 - Henrique Meirelles, former president of the Central Bank, has become increasingly comfortable in his position as a critic of current economic policy. This Sunday, he advocated for a new development model, anchored not in consumption, but in investment and increased public and private savings. Read below:

Theory of independence

Priorities should always be reviewed. Brazil's priorities ten years ago are not the same as they are today. At that time, we were coming from a pattern of recurring crisis for more than two decades, with vulnerable public debt sensitive to investors' risk aversion, inflation that reached 17% in May 2003, and external public debt far exceeding international reserves.

The priority, then, was to stabilize the economy and improve public finances, thereby establishing conditions for job creation and sustainable growth.

This was done with utmost rigor: inflation was controlled, reserves exceeded the total public and private external debt in 2008, and public debt fell substantially relative to GDP. As a result, Brazil grew at accelerated rates between 2004 and 2010, creating millions of jobs and impressively expanding the domestic consumer market.

This evolution has brought greater economic, political, and social stability to the nation. It is necessary to maintain what has been achieved and take the next steps.

The only way to resume growth is to increase productivity and the economy's capital stock. That is, to invest in machinery and equipment, education, training, and infrastructure.

This substantial increase in investment ultimately requires an increase in national savings, and here we arrive at the Gordian knot. Brazilian savings are low by international standards and extremely low by the standard of emerging countries, such as this one. Sheet He showed this on Monday. Increasing savings is the next big national challenge.

The most immediate step is to increase public savings, with reduced current spending and more investment—an essentially political decision. The difficulties in Congress in this area are real and understandable. But they are no greater than the challenge overcome in the last decade of balancing the accounts and stabilizing the economy.

The second step is to increase private savings. To achieve this, public policies must stop prioritizing increased credit and consumption and instead encourage savings, even if it means a loss of consumption in the short term.

Increased investment will come from both domestic and foreign savings. However, dependence on foreign investment is unsustainable due to the growing external deficit and uncertainties in international markets.

Therefore, national savings are the only viable path to sustainable development in the medium and long term.

To achieve this, authorities need to adopt this priority as a national goal, even at the cost of sacrificing short-term pro-consumption policies.