The Minister of Finance warns of credit deterioration and calls for an urgent cut in interest rates
(Reuters) – Finance Minister Fernando Haddad said Friday evening in an interview with Brazil’s CNN that he was “interested” in the Brazilian credit market, describing the shift in interest rates in Brazil as “very strong”.
According to Haddad, it was “scheduled” to cut interest rates by the central bank at the beginning of this year, which ended up not happening.
According to him, when the government released the first package of economic measures, the expectation was that they would contribute to British Columbia’s decision to lower the Selic base rate, currently at 13.75% per annum.
Haddad also stated that he is not concerned about the relationship between President Luiz Inácio Lula da Silva and British Columbia President Roberto Campos Neto. “I’m more concerned about what’s happening in the credit market,” he said.
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“I have testimony from many powerful companies that when the interest was 2% (annually) … strong entrepreneurs took out loans at 6%, 6.5%. Today, these same entrepreneurs are trading at 20%,” he said.
According to the minister, the measures taken by Jair Bolsonaro’s government ahead of the 2022 elections caused the market to start charging ever-increasing interest rates to renew its debts.
Haddad also rated Brazil’s credit “very bad”. “We do not have a credit system in the country.”
At another time, the minister said he continued the dialogue with Campos Neto. According to him, the Executive Secretary of the Ministry of Finance, Gabriele Gallipolo, “talks more.”
Tax and monetary policy
During the interview, Haddad also touched on the relationship between fiscal and monetary policy.
He pointed out that “this division between monetary policy and fiscal policy is a way of thinking about the economy that perhaps cannot translate the complexity of this organism that has two arms, financial and monetary.”
Haddad advocated the establishment of a “relationship of trust” between the government and the central bank so that they would move in the same direction.
At the same time, Haddad discussed the central bank’s handling of monetary policy.
“Europe keeps interest rates negative so far. Inflation in Europe fell from 9.2% to 8.5% recently. And Europe celebrated. Why doesn’t the ECB (European Central Bank) give a shock on interest rates?” Haddad asked. “Because after practicing negative interest rates for so long, what will the impact be in the real world?” he noted.
The minister defended the fight against inflation, but expressed concern about the level of interest.
“My concern, as finance minister, is calibrating (the interest rate). We need to learn how to navigate turbulent seas.”
Regarding the bankruptcy of SVB Bank of America, which occurred on Friday, Haddad said that the announcement is worrisome. “We need to see if it’s regular.”
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Haddad also took advantage of the interview to discuss British Columbia’s autonomy, which was approved during the Bolsonaro government. Because of the autonomy, Lula cannot change the President of British Columbia for the first two years of his rule.
“After BC independence, the entire technical body, from the presidency down, should have taken the position of political abstinence. Because that’s the way it is in the world,” he said.
Campos Neto faced the wear and tear this year with the Workers’ Party administration over the news that he would have gone to vote in last year’s election wearing a Brazil national team jersey – a symbol of Bolsonaro’s voter identification. In addition, he was also part of the Bolsonaro government’s WhatsApp group of ministers.
Haddad also said that the adoption of home rule in British Columbia may not have come at the right time. He commented, “We might have introduced this passage into Brazilian legislation, at the worst moment… had it been done in the government of Fernando Henrique, in the transition to Lula…”.
Asked about the name of the British Columbia Monetary Policy Board, whose director Bruno Serra will be leaving, Haddad said he took President Lula — who is responsible for selection — three professional profiles: one academic, another technical one. more market. “Whichever one of the three he chooses will contribute to the central bank,” he said, noting that in Lula’s first government, the selected directors had technical features.
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