It is complex to live with BC not recommended by Lula, says Haddad

Minister Fernando Haddad (Finance) said that the experience of living with the president of the Central Bank, Roberto Campos Neto, has been “extremely complex”. According to him, this is explained because the government of Luiz Inácio Lula da Silva (PT) did not choose its own name to command the monetary authority in 2023.

“It’s been an extremely complex experience living with a Central Bank president that you didn’t choose”declared the minister in an interview with the newspaper Folha de S.Paulo published this Saturday (April 27, 2024).

The Central Bank is an institution with operational autonomy. The 8 directors and the president serve 4-year terms –that do not coincide with the electoral period of the Executive Branch.

Lula will only be able to obtain a majority of seats in 2025, when Campos Neto and 2 other directors end their term.

The president of the monetary authority is in the last year of his term, which ends on December 31, 2024. He advocates that a successor be chosen by Lula before the end of the year, so that the name can be approved in Congress before the BC’s term ends. to turn.

The current government’s relationship with Campos Neto is turbulent on the part of the PT team. Since taking office in Planalto in 2023, Lula has criticized the high level of interest rates. The criticism continued even after the Selic cuts began. The president said on March 11 that Campos Neto contributes to a “monetary delay” in Brazil.

Read below who the BC directors are and how long they remain in office:

SELIC LEVEL

A Folha de S.Paulo, Haddad said he did not expect an increase in the basic interest rate. According to him, the slowdown in inflation does not justify this type of attitude.

“I’m not a director of the Central Bank, but for me it would be a huge surprise, with March inflation at 0.16% [o aumento da Selic]. What are they asking for from the Brazilian economy?”he declared.

The base rate is 10.75% per year. The monetary authority made the 6th reduction of 0.5 percentage points on March 20.

However, the B.C. signaled that the last cut followed of half a percentage point in the basic rate should be held at the Copom (Monetary Policy Committee) meeting on May 7th and 8th. Falls may be smaller or not even exist in subsequent encounters.

Higher interest rates tend to control inflation, that is, price increases in general. More expensive credit slows consumption and production. As a result, prices do not increase as quickly. It was the strategy that Campos Neto used in 2022 and 2023 to slow down the price index.

NEW TAX MEASURES

To the newspaper, Haddad stated that the government will take new initiatives with the aim of balancing public accounts, but that he cannot yet disclose specifically what they are because everything is “in study”.

During his tenure as head of Finance, the minister tries to implement measures to increase revenue through tax collection. It is an attempt to eliminate Brazil’s fiscal deficit – a goal considered by experts to be unfeasible.

Some of these measures are being processed or have been processed in Congress. Others are being analyzed by the STF (Federal Supreme Court), as in the case of payroll tax relief for 17 sectors of the economy and municipalities with up to 156.2 thousand inhabitants.

“The Ministry of Finance faces rounds. Every 6 months is a round. Last year we won the 1st and 2nd rounds. We are now in the 3rd round, in the Legislative and Judiciary”declared Haddad to Sheet.

Haddad’s relationship with Congress is weakened due to the impasse involving payroll tax relief. Congress, on several occasions, determined that the mechanism must be maintained. The government then appealed to the Supreme Court on Wednesday (24 April) to end the measure. Lula’s economic team claims that the benefit is unconstitutional.

According to the minister, the Legislature also needs to be committed to public accounts because of the Fiscal Responsibility Law.

“That is why we are now appealing to the STF. It must be said that Congress also has to respect the same law. And that acts that do not respect it need to be suspended”he spoke.

This is not the first time that the head of Finance has mentioned the role of other Powers in relation to fiscal responsibility. He called for a pact between the Executive, Legislative and Judiciary on the topic on April 2.

STF minister Cristiano Zanin, appointed by Lula, issued on Thursday (25 April) an injunction favorable to what the President of the Republic wanted. He ordered the end of the exemption. The action is now being voted on in the Court’s virtual plenary session.