Monthly Statement – Apr/19

Dear Friends,


The BRL 1.2 trillion total expected savings in the next ten years built in the pension reform proposed by Minister Paulo Guedes seems a fabulously large number, but it is not. As Minister Guedes himself points out, we spend annually USD 100bn, equivalent to a Marshall Plan – which was “sufficient” to rebuild Europe after the Second World War. This is an astonishing number, and we need to revert its course into better quality spending and investment. Moreover, the trajectory of our public finances leaves no doubt as to the total and imminent disaster and even a reversal of this nature will still leave daunting challenges ahead.

No less relevant in this process are other actions proposed in the set of a new economic “model” proposed by Minister Guedes. The most liberal aspect of this new economic team, with all the changes proposed, whether on the macro or microeconomic agenda, will be consolidating measures of this first and most important reform: the Social Security. However, the proper sequence must necessarily be as follows: cutting and closing expenditure bottlenecks (eliminating injustices and imbalances), and sequentially using assets to “decrease” the public debt and reverse expectations – this effect will be maximized if applied in this sequence – otherwise we will run the risk of selling assets without eliminating the original problem. The challenges, especially the political ones, are enormous, and everything seems not aligned to the extent necessary and proposed – here taken as the timing of the approval of the reform and the volume of the intended savings. However, the determination and responsibility of all, like the recent rapprochement of Presidents Bolsonaro and Rodrigo Maia, show that there is a strong possibility for the Executive and Legislative to be united to overcome difficulties, and thus make possible what seems almost impossible!


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