Bolsonaro adopts Guedes's discourse
Those who care to read the introduction of the message that President Jair Bolsonaro sent to Congress along with the budget proposal for 2021 may have a surprise. In it, Mr. Bolsonaro takes the side, without naming, of his Economy minister, Paulo Guedes, in the battle waged over the last few weeks about the best strategy to revive the economy in the pandemic's aftermath.
In his message, the president depicts a worrying picture of public debt and says that in this context "it is important also to highlight that even productive government spending, such as investment in infrastructure, has negative effect on growth, as the debt level increases, because the cost in terms of investment return of the debt increase becomes higher than the return of such expenditures."
Then Mr. Bolsonaro states: "In the case of such high debt as the Brazilian one, the impact of spending increase, even being public investment, would have a negative final result on economic growth." He gives reason to Mr. Guedes by saying that "the only possibility of increasing the public investment and raising the growth in this scenario would be with the reduction of spending on consumption and administrative costs of the public sector." In his message to senators and deputies, the president fully embraced the discourse of his Economy minister.
As many may recall, in the backrooms of the government there was a dispute between Mr. Guedes and the military and political groups of the administration, which devised a program of public investments to stir the revival of the economy. According to some information leaked to the press, the idea was to allocate about R$35 billion to infrastructure projects and efforts to fight the drought in the Northeast region. Ahead of the program, which was even called "Marshall Plan," were Chief of Staff Walter Braga Netto and Regional Development Minister Rogério Marinho.
They even tried to find loopholes to enable the investments, taking them off the federal spending cap. The idea that would be submitted to the Federal Court of Accounts (TCU) was to issue a provisional measure for the government to take an extra credit of that amount for investments during the pandemic, spending that would be excluded from those submitted to the cap. Since the federal government has been posting high primary deficits since 2014, the projected investments would make the Treasury increase its debt. Mr. Guedes was against it.
One may argue that the presidential...
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