Laura Carvalho: "Distributing income in Brazil without changing taxes is quixotic"

247 – Economist Laura Carvalho states in an interview with El País that the discussion about income distribution in Brazil takes on quixotic proportions when it disregards the issue of taxes. She says: "it's as if the task of distributing income becomes somewhat quixotic when you begin by concentrating wealth."

Read excerpts from the interview:

"What allowed for both sound public finances and public investments was, first and foremost, the external environment. Between 2006 and 2010, there was a very strong expansion of investment and a drastic reduction in debt. Public investments were not the only cause of growth; there are several factors. Since 2003, there has been..." tree Regarding commodities, the situation improved. Economic growth began to increase slightly, and public finances became more controlled and comfortable. However, initially, this did not come with growth in domestic consumption. The difference is that in 2006, with the PAC [Growth Acceleration Program] and a series of measures to expand investment, along with the virtuous cycle of income redistribution, wage growth, and growth in certain sectors, the growth process occurred without harming public finances. tree The commodities boom lasts the entire period, from 2003 to 2011. However, until 2005, growth comes only from exports, not from household consumption or business investment. What changes there is that the country begins to have public investment alongside the pillar of income distribution, boosting the domestic market. What balanced the accounts was higher tax revenue due to... tree commodities and the growth of the economy itself, which has several contributing factors.

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We don't have a positive external scenario today, which means that recovery won't come from outside. At the same time, we have an economy heading towards stagnation in per capita income, experiencing the slowest recovery in the history of Brazilian crises, which means that entrepreneurs have no reason to invest. We've seen in the last three years that the argument that business investment is autonomous, independent of the state's role in the economy, is false. You need some kind of engine to make the domestic market dynamic again. Generally, this requires an autonomous decision. You can't pull an economy out of a stagnation or a hole without a new injection of energy into the market. Traditionally, the discussion is: how to make public investment viable so that it functions as this engine? You need to raise more revenue. Part of that will come from growth itself. But I'm not arguing that the growth generated by investment will be sufficient to finance it. That's not my argument. Public investment has a very strong multiplier effect, but not necessarily enough to finance the spending itself.

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