That is something Guedes does not seem to think is a problem. He thinks its ok for the exchange rate to have dropped pretty much non-stop since Bolsonaro took over. I guess its ok if you are a banker and put all your bets on this happening, but for the rest of the population, including Bolsonaro supporters who love going to Miami, this is not ok. The dollar going up, on purpose, is what is causing the current inflation. There is currently no policy in place to revert this, so I am personally betting on continued deterioration of the Real. Can anyone tell me where are the magical investors that Guedes is waiting for to come and save the country? What type of investor is attracted to the graph below? I can guess which ones would be: the ones looking for a fire sale of broke companies and discounted assets…
This is blackmail. Maia is holding the economy hostage to get his agenda through. If it doesn’t get passed we have chaos, if it does the economy will still suffer since the policies are useless. It is a lose-lose situation for the Real and local investments. He makes up numbers and presents bad math, makes up a lie that if the government debt = GDP then all hell breaks loose. There is absolutely no link between debt and GDP, not in Japan, not in the USA, not anywhere, only in Guedes and Maia’s agenda.
Another blackmail: if we don’t sell the post office everyone dies!! The government has no need to sell the post office, it has a money printer. A privatized post office will stop distributing mail where it is not profitable, and then the mail system is no longer useful and becomes another FedEx, which we don’t need, we have enough logistics companies that don’t serve the whole country. Who wins from the privatization? The middlemen. Guedes buddies. Will you, as an investor, make money? No, the big money will have already been made by the time you get to play.
This is a bit misleading. When companies pay salaries there is no new money being added to the economy, it is just changing hands. However, when the money is on the hands on the employees, it gets used and does circulate more, increasing the GDP. Money in the hands of the business will just end up in the shareholder’s bank account as dividends, which is just extra money for them, and it won’t circulate, so it is a drain on the economy. The only “new” money added to the economy from the 13rd wages are the ones paid to government employees. That is new money, unless the government is dumb and tries to generate a surplus. In that case its old money.
This is awkward, the usual suspects for austerity push and monetary policy bias are throwing the towel and recognizing that only fiscal policy can generate demand that helps the economy in times of need. This is coming from the Fed, ECB and Bank of England central bankers! I guess they are listening to IMF’s recommendations from last week… Keep an eye for how Guedes talks about this, although I don’t suspect he will change his tune, he may try to re-brand fiscal policy as something else so that he can allow some fiscal policy to take place and save the economy. He already seems to have slightly opened the door for coronavirus relief payments if the epidemic continues to grow, so it may be disguised as that…
An administrative reform of the government’s structure could be a blessing, IF the goal is only to make the services it provides to its people more efficient (less bureaucratic, faster, more useful). This is not what is being proposed although it is partially being sold that way in the article. The reform’s true goal is to fire government employees and reduce what government pays people and spend that money on contracts with companies instead, generating more kickbacks. The problem is that this redirection of government expenditures towards the rich will drain money from the economy, as the rich save it or exchange it for dollars. The government employees that lose their jobs will face a recession and no chance of getting a job. Also, since there will be less money flowing through the economy, there will be less tax income for the government (the rich pay very little tax), which will further increase the government deficit, requiring the government to become even more indebted to the rich.
That is totally true, but only if you replace “Brasil” with “My rich friends in the banking sector and the export business”. See graph above where our economy in US$ is tanking, and everything in Brasil is on sale for the rich to buy with their dollars.