Archive for the ‘Economics’ Category
Serra and Banco Central
Banco Central Debate
The question of the degree of independence to be accorded to the administrators of Banco Central do Brasil became an issue for discussion in the Presidential campaign this week. This was a question raised as a result of comments made by Jose Serra, the PSDB’s pre-candidate for the Brazilian Presidency this year, in an interview on Monday with Radio CBN, where Serra raised the issue that at the beginning of the world economic crisis, Banco Central reacted slowly to reduce interest rates, indeed slower than most if not all of the major industrial countries. He also made reference to Brazil having an effective rate of interest that was the highest in the world.
Serra continued by saying that Banco Central could not be independent of the Government and its economic and fiscal policy, which BC was obliged to administer operationally.
The candidate of the PT, Dilma Rousseff was quick to react stating that Banco Central had taken many measures during the crisis, and was successful with the monetary policy it developed to confront the crisis.
Thus, we have a disagreement about the actions of Banco Central in late 2008, early 2009, but the debate does not seem to go very far when discussing the independence of Banco Central, as neither Dilma, nor Serra will argue that Banco Central should have the autonomy to adopt policies that are not in the Government’s interest.
In his interview, Serra also affirmed his support in the floating exchange rate, fiscal responsibility and a system of goals to control inflation, which has been the policy of President Lula`s government, as well as its predecessor.
The debate now about high interest rates should perhaps be directed towards the effects of the current imbalance in the present Government`s public accounts on interest rates, and what could be done to reduce Government spending and interest rates as a consequence.
Jose Serra, Critic of Banco Central
Government Accounts – First Quarter Deficit
Government Accounts – First Quarter Deficit
The Brazilian Government was making comforting noises after the release last week of the first quarter government accounts which showed a small Primary deficit of R$ 216 million for March, down from positive results of R$ 7.2 billion in March 2009, and R$ 13.6 billion in March 2008.
For the first quarter, the Primary surplus was at R$ 16.82 billion as compared with surpluses of R$ 18.8 billion for a similar periods of 2009, and R$ 42.9 billion in 2008.
However, the Government has financial expenses in the first quarter of R$ 44.97 billion, giving a nominal deficit result of R$ 28.15 billion (The nominal deficit for March alone was R$ 17.01 billion.). Thus, the nominal deficit for the first quarter was R$ 28.1 billion compared to R$ 21.1 billion in 2009, or a surplus of R$ 2.5 billion in 2008. This is at a time where the Government is collecting taxes in record volumes. The increase in taxes in March alone was 12.9% higher than in 2009 (R$ 41.9 billion as compared to R$ 37.2 billion) and on a quarterly basis collection was R$ 133.5 billion in 2010, as compared to R$ 112.7 billion, an increase of 18.3%.
Government expenses in the first quarter were up 18.7% over 2009, from R$ 105.6 billion to R$ 125.4 billion. In March alone, expenses were R$ 44.3 billion, 39.7% higher than in the R$ 31.7 billion of March, 2009.
The situation of higher collections, much higher expenses, and resulting deficits at both the primary and nominal levels, is cause for concern. The Government, however, is citing evidence not only that April will be a better month, but that the April result will be so good that the country will be back on track to meet its goal of an annual surplus of 3.3% of GDP.
During the month of March the Government paid its renegotiated payables. Last year, due to the crisis and the desire on the part of the Government to put capital in the market, these payables were paid in January, and thus March is not comparable with March. However, both were paid in the first quarter, which makes the quarters comparable. Other causes cited for the increase in expenses were the purchase of educational books by the Education Ministry, resources required by the Unique Health System, and the bid for the acquisition of submarines by the Ministry of Defense.
In an election year, when the Government’s candidate appears to be floundering, it will be interesting to monitor the extent to which the Government succeeds in holding down Government spending.
Brazilnewsblog's Blog 