Towards a more institutional 2014

With the holidays, celebrations, and all the emotions of starting a new cycle in both personal and professional life now over, the economic scenarios for 2014 are beginning to take shape. It's time to start planning the likely events that will determine the economic agenda for the new year.

From all perspectives and scenarios, what we are certain of is that economic aspirations will definitively be at the center of attention. In an election year, which has a history of difficult economic indicators, the economy will definitively be on the agenda of politicians, in debates, and in external assessments.

Economic weight will be decisive in maintaining or alternating political power at all levels. Social achievements need to be continuous and lasting, and are no longer a bargaining chip. Now, we need to guarantee a much broader, more complex social status, aligned with the aspirations of the population.

Gone are the days when the only form of exchange was the delivery of a social benefit card. Population demands have increased, and even if still on a small scale, the long-term outlook shows imperative growth.

It's pointless to finance homeownership without efficient transportation networks that guarantee the movement of the population. There are no communities without security, without healthcare. Parents cannot work if there are no daycare centers to leave their children. There is no available workforce without qualifications; in other words, social and economic demands have expanded, and this is happening consciously across the entire population.

We need an integrated, united, and broad economic and social debate. Inclusion and maintenance of the new socioeconomic orders are crucial and fixed points in any political debate. There is no social progress without economic contribution, and there is no economic development without social advancement.

2014 begins with a scenario that is undoubtedly worse than 2013. Higher basic interest rates, a downward trend in formal employment, inflation above ideal levels, and a loss of credibility among economic agents. This doesn't mean that 2014 has to end badly. In fact, I expect a qualitative social leap in 2014, with more rational choices and less deindustrialization, less interventionism and more social effort. Long-term planning and a strategic macroeconomic policy support the positive expectations for 2014.

Dilma fulfills her institutional role of expressing optimism for 2014; however, major challenges will guide her actions: organizing the public budget; adjusting spending in an election year; reconciling the statesmanlike agenda with the electoral agenda; reconnecting with the national production chain; expanding privatization projects, ensuring administrative efficiency and financial returns for privatizing partners; ensuring that the World Cup is a positive social legacy; and reducing the gap between the legislative, executive, and society.

The debate on fiscal adjustments, the tax relief process, fiscal easing, the need to maintain a primary surplus with a high level of institutional confidence, and obviously a budget review to reduce the cost of the public sector, accentuate a delicate agenda of actions to be faced by the federal government.

We had a year with irreversible institutional losses and a breakdown in business confidence regarding the federal government's ability to unlock the economy.

We started the year with important changes that directly affect citizens' wallets. The minimum wage, starting in January, is R$ 724,00 compared to R$ 678,00. This is an injection of capital into the economic economy, which will benefit a large portion of workers and especially pensioners.

In nominal terms, this is one of the worst adjustments in recent years, largely due to the drop in GDP growth, which serves as a benchmark for salary adjustments. For public finances, an increase in spending of R$ 14 billion is estimated. This deficit needs to be covered by increased tax collection efficiency and administrative rationality. The tax burden has long since reached its peak, and there is no room to seek further tax relief from society.

Another important change, already in effect for these first days of 2014, was the adjustment of the Income Tax table. The rates have been automatically adjusted by 4,5% since 2010. The point, in this case, is that there was a disproportionate increase between the brackets and the inflation rate. It should be noted that today, anyone earning 3 minimum wages would already be paying tax withheld at source. There was an expansion of contributions, which in fact means an increase in the tax base, less disposable income, and more money for public coffers.

Throughout 2014, the government will not have the same room for maneuver to stimulate consumption and revive the economy. In short, 2014 promises to be a year of major issues, many changes, and economic outcomes that will be influenced by the conscious resumption of national economic prudence, as well as by externalities that may be generated by movements in the US and Chinese economies.

From Washington's perspective, the Fed's new policy will be able to significantly improve the global scenario. From Beijing's perspective, the changes and reforms in the economy tend to begin showing results; however, its focus will be internal, and there is no expectation of direct Chinese influence in other countries, except in the financial sector, with the expansion of its banks to other countries.