BRASILIA – The Secretary of the National Treasury, Mansueto Almeida, stated that Brazil needs expand presence in the international market and increase both exports and imports. He said the task would be a challenge, as several countries in the world were already becoming more protectionist even before the covid-19 pandemic. The secretary, however, defended globalization and the rescue of the World Trade Organization (WTO) and said that the solution to the crisis is not to close.

“We need to learn to cooperate in international trade, not to close,” said Mansueto, in a webinar promoted by the website Focus.jor. “We cannot get into a silly and childish fight against globalization. Everyone will lose with that”, he added.

According to Mansueto, after the covid-19 crisis, the world will return to seek profitable investments, and the private sector needs to have confidence in Brazil to invest resources in infrastructure. This confidence, said Mansueto, may also influence the exchange rate. He considered, however, that this matter is the responsibility of the Central Bank. “Whether the exchange rate is going to fall further or not depends on us creating a favorable environment for investments.”

Mansueto acknowledged that the real was the currency that lost the most value against the dollar in recent months. He mentioned the pandemic and also the fear of investors about political disputes and the fear of passing reforms. “Where does the exchange rate go is an open question,” he said.

Still on the effects of globalization, he said that the division of labor increased productivity and was good for several countries, including Brazil, because it cheapened the prices of items that were once considered luxury items, such as phones. “If we want to produce everything within the border, we will have bad and very expensive products,” said Mansueto.

The secretary also stressed the importance of the construction of trade agreements by the WTO, fundamental, according to him, for the construction of the post-war welfare state. “We need to respect forums and learn to cooperate in international trade, not to close,” he said. “Protection does not lead to further growth. There is no point in increasing tariffs. I am very afraid and we have to be careful with this protectionist wave. Everyone will lose.”

Tax reform

The Treasury Secretary said the government will need a lot of political dialogue to pass a tax reform. According to him, the challenge is to reduce the number of taxes and end cumulativeness and regressivity, in addition to simplifying tax rules so that they are subject to frequent interpretations and changes.

“What is paid in income tax must depend on income, and not on the type of employment contract,” he said. Regarding aid to states and municipalities in the midst of the pandemic, Mansueto said that this is an obligation of the Union and that both the economic team and President Jair Bolsonaro understand this. The secretary said that the majority of governors understood the need not to readjust salaries.

The aid, according to Mansueto, will be R $ 60 billion, divided into four transfers, considering the most critical period of the pandemic. In addition, states will not need to pay their debt service until the end of the year and will also be able to renegotiate terms with public banks.

Gross debt

Mansueto also said that the gross debt should reach 94% of the Gross Domestic Product (GDP) this year because of measures to mitigate the effects of the coronavirus, but which is expected to fall again with fiscal adjustment measures and reforms to be resumed in 2021.

“What matters to the investor is to know that he will receive up front and that at some point the debt will start to fall”.

According to the secretary, with the measures to face the economic effects of the pandemic and the increase in health spending, the primary deficit is expected to reach R $ 708.7 billion this year, or 9.9% of GDP.

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