Haddad says interest rates in Brazil are ‘inappropriate’

The minister noted that there has been a brutal increase in the negative interest rate (base interest rates set by British Columbia), from 2% to 13.75%, as a result of what he called the “election spree” promoted by Bolsonaro.

Haddad complained that the cost of this electoral frenzy was not shown with the necessary clarity.

“We had an electoral outburst of a doomed president, who desperately sought re-election and produced an increase in spending, exemptions, that accompanied a brutal increase in interest rates, which rose from 2% to 13.75%,” he said.

For him, this is the problem that needs to be discussed in order to understand the difficulties in cleaning public accounts. According to Haddad, if “the pieces fit together properly”, and the necessary measures are taken to counteract this problem, Brazil will be able to grow again with high quality. “With lower inflation and lower unemployment.”

Haddad ruled out the Lula government’s adoption of the target exchange rate. For him, it is possible to work with the “management” of public accounts to achieve stability and not allow too much fluctuation in both the exchange rate and interest rates.

“There is no discussion to set the target exchange rate,” he said. According to him, the riyal is one of the most traded currencies in the world due to the actions of speculators. “If (the real) is not convertible like the euro and the dollar, why is it traded in this way? It is traded by speculators precisely because of the high volatility.

For him, the volatility of the exchange rate in Brazil is bad for the Brazilian currency because investors do not have a planning horizon. Haddad believes that the reason for this is that with volatility, it is not possible to “plan” an investment and know with certainty what the internal rate of return will be when the exchange rate is more volatile.

“Someone might say they have an average. But, if a person needs liquidity, he cannot count on luck, ”the minister wondered. He noted that for this reason the exchange rate and interest rates are two very important variables for investors to have a long horizon of confidence in Brazil With more predictability.

“There is no target for these two variables. Especially because it is almost impossible to set targets for things that respond strongly to market forces,” he said.

The talk about the exchange rate came in response to a question about the contribution that a lower rate could make to fighting inflation.

Haddad also answered a question from one of the interviewers on Portal 247 about whether it is possible to combine low inflation with a good level of employment. The investigator asked the minister the question, starting with a reference to the Central Bank of the United States, the Federal Reserve (Fed), which carries a plaque at its headquarters indicating its mission to ensure stability, taking into account the optimum level. of employment.

Haddad responded that Brazil had experienced moments of low inflation and unemployment. But he thought the scenery sometimes helps a lot. For example, when the foreign market is good and the prices of the products exported by the country are high. There are more and more favorable conditions. He said that the great advantage of the great rulers is to take advantage of the windows of opportunity when the sky is blue,” stressing that these benign periods do not last in a market economy with the financial speculations that exist in the world.

According to the minister, there are speculative bubbles everywhere. He assessed that the international crisis of 2008, in practice, has not ended until today. The United States has high inflation, 7% to 8%. There are countries in Europe with 10% inflation, which hasn’t happened since World War II.”

Haddad said he would submit a proposal for a new fiscal framework by the end of the first quarter. With this timeline, the new minister in Lula’s government believes that from April, with congressional commissions already in place, discussion of the project may begin. According to him, with the design of the new financial anchor, which has not been detailed again, it will be possible to put the country on the right track.

Interlocutors questioned the press’s focus on the financial framework at the expense of other issues. The minister did not reply. He also promised from the end of April to start discussing tax reform with Congress.

The minister said the president-elect’s government was elected to correct the mistakes of Bolsonaro’s government. But he wondered that the government is on its second day. “We know that time is short,” he said.

The minister attributes the criticism and market criticism at the beginning of Lula’s government to the impact of the policies pursued by the Bolsonaro government on the eve of the elections to win the elections. This has been a recurring point for Haddad ever since Lula nominated him for the position.

For him, the “record goes down” for the financial market with the impact he calculates with 300 billion reais from the measures adopted for the ex-president’s re-election. “It’s Bolsonaro’s legacy. It’s not a speculative attack. It dropped a penny,” he said.

Haddad said that the economic team will present a “flight plan” to Lula as soon as space opens up on the president’s agenda. Lula receives many foreign delegations with heads of state and government who have come to Brazil to attend the inauguration ceremony. Haddad expected a day or more to present the plan to the president.

“In my first dispatch, I will present the first trip to President Lula in the short, medium and long term. I will present him with a wide range of actions and decisions that he will have to take.” Haddad said Lola is very detail oriented and loves to know the impact of each one of them.

“He (Lola) will agree with one part or disagree with the other. He will want to analyze many others more calmly and that’s the way he works and that’s the way I’m used to doing it,” he thought about it. Based on the appeal decision, Haddad said that the government will have to re-estimate the indicators.

According to Haddad, the government found many shortcomings and will revise the estimates of what was planned by the previous team. “Everything has to be re-evaluated,” he said. Inform the Minister that he is currently undertaking this reassessment.

Without giving details, the minister said he believes what President Lula has in store is very reasonable given the level of damage to the economy. But he explained that the implementation time and the opportunity to do so, Lula will have to “pull for himself” by listening to the economic team as a whole.