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Brazilian economy : the Minister of Economy announces an increase from 5 to 5.5% of the country’s GDPPosted 2021-07-27
The Minister of Economy, Paulo Guedes, recently participated in a public hearing at the House of Representatives and said that the Gross Domestic Product (GDP) of Brazil should grow 5% or 5.5% in 2021.
For Guedes, the “country is surprising the world” and cited the forecasts of the financial market, which were of a larger drop in GDP than in relation to the year 2020. “Brazil is better than France, better than Italy, better than everyone from an economic point of view,” said the minister.
The minister said that the Brazilian economy has recovered in a “V” shape, performing better than developed countries, with the exception of China and the USA. “The economy has already returned in V, we are back to the level before the pandemic, with the difference that we continue to grow, we will surpass this level.”
Citing the retail numbers released by the Brazilian Institute of Geography and Statistics (IBGE), Guedes said that “the economy is taking off and that this shows up in different indicators, such as tax collection.”
“A cog that worked”
Guedes said that the Brazilian economy is a “cog that worked.” “We were tested at the limit,” said the minister. On the other hand, he acknowledged contributions brought to the government by the opposition itself, including on matters such as the Social Security Reform. “Even the opposition, when it diverged, brought important lessons,” he said. “They helped us when they said that the BPC Benefício de Prestação Continuada is important for more fragile regions.”
The minister also gave a retrospective of the government’s actions in the pandemic. He said that the government zeroed out the Bolsa Familia line and attended to the most fragile immediately. “We prefer to sin by excess. We spent 8.5% of the GDP, R$600 billion, half for the most fragile.”
According to him, the Emergency Benefit (BEm) cost R$47 billion and “protected one third of the formal private labor force in the country.” He repeated that it was the first recession in which there was the creation of vacancies.
Guedes also defended, during the hearing, the taxation of dividends to reduce taxes paid by companies and wage earners, commenting on one of the controversial points of the tax reform, recently sent to Congress. The minister’s argument is that Brazil is a low-income country and 75% of the workers receive less than R$1,500 per month.
For him, there is no point in “throwing” taxes over “30 million Brazilians with relatively low income, while on the other side 20 thousand capital owners received R$ 400 in dividends and had exemption of R$ 50, R$ 60 billion”.
“What we did was: let’s tax capital income at approximately R$60 billion, R$40 billion we give back to companies and R$20 billion, we unburden the low-income wage earner,” he explained.
Guedes claims that doing this is “relatively simple.” “In fact, we wanted to then reduce some deductions, some subsidies so that everything that was paid by the shareholder, after the money left the company, is returned to the companies. In the companies is where the miracle of productivity happens, where you have technology, capital, institutional organization, where wages and worker productivity go up,” he said.
“So, if it is reinvested, if it stays in the company, the tax should be low. Now, if you take it out for individuals, for personal use, which is natural, it’s no problem to be rich, you can’t be ashamed of being rich, you have to be ashamed of not paying taxes. So that’s basically it,” he added.
For him, taxing the richest would not be effective and would make the country’s economic situation worse. “With this, the upper class leaves the country,” he affirmed.
The minister stated at the hearing that he is “in favor of all privatizations,” but that he understands that it is not possible. For him, with privatizations, “we can put an end to misery”.
In another moment of the hearing, Guedes stated that “the progress of the new coronavirus pandemic in Brazil has led the government to renew the payment of emergency aid in 2021.” “The pandemic is what recommended us to renew the emergency aid,” the minister said at the hearing, recalling the increase in Covid-19 cases earlier this year.
“We have now renewed the emergency aid for another three months. We will go until October,” Guedes said. “In November and December, we re-engage (sic) in Bolsa Familia,” he added.
Guedes also cited a series of measures adopted by the government last year, in the first wave of the pandemic. In addition, he argued that mass vaccination in Brazil has finally taken off. “The government is producing mass vaccine, in addition to imports,” he said.
The minister went on to say that “Health Minister Marcelo Queiroga’s prediction is that in three or four months the Brazilian states will have vaccinated their entire adult population.” “Queiroga says that in three or four months we will have epidemiological control of the pandemic,” he said.
According to Guedes, Brazil went “two or three months” without emergency aid at the beginning of the year, but even so the Brazilian economy “pumped up” in that period. “The economy went up just the same. That means it was already getting up again,” he said, adding that the “release queue” of resources also allowed some transfer in January and February.
At the hearing, Paulo Guedes, said that the Bolsonaro government currently has an “axis of parliamentary support” in Congress, something it did not have at the beginning of the administration.
To illustrate the comment, Guedes recalled that this year, “in a few weeks,” Congress approved the Central Bank autonomy project, the sanitation law, and the gas law, among other matters of interest to the government. “Everything is moving,” said the minister. “The economic plan is moving forward.”
Guedes, in relation to the public service, said that the sector should have the same basis for salary decisions as the private sector. “No one should earn more than the president, and that is what we want to change,” he said.
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