The president of the Central Bank, Roberto Campos Neto, stated this Tuesday, 30, that the issue of fiscal policy will dominate the international debate and that the world will be keeping an eye on Brazil’s internal agenda. “It’s going to be more important to do your homework,” he said in a recorded interview with CNN.
Campos Neto repeated that, after the increase in expenses during the pandemic, countries began to face a lack of coordination between monetary and fiscal policies. He cited that the cost of rolling over developed nations’ debt has tripled, which reduces liquidity elsewhere.
In the case of the United States, for example, maintaining high interest rates for longer than expected makes life more difficult for emerging countries, according to him. Campos Neto said that the more valued dollar against the real precisely reflects the perception of American interest rates.
He also stated that there is no relationship between the US interest rate and the basic interest rate in Brazil, the Selic. “There is no relationship between the American interest rate and the Brazilian one, but it has an influence on the variables that impact the way we work,” he explained.
Despite the challenges, Campos Neto highlighted that the Brazilian currency behaved relatively well against interest repricing. He said that the fear of higher interest rates in the US is linked to the high cost of debt for poor countries and the more expensive access to private credit.
Public policies x fiscal policy
The president of the Central Bank stated that public policies are excellent, but recognized that fiscal policy in the country is almost exhausted.
Amid the struggle between the government and Congress over the extinction of the payroll tax exemption policy for the 17 sectors, Campos Neto said that, in general, tax exemptions are bad, especially when specific sectors are chosen.
“In general, these policies improve prices in the short term at a cost in the long term (…) It’s like selling lunch to buy only half of dinner,” he said in a recorded interview with CNN, reinforcing that he is in favor of extinction of the exemption policy.
Regarding tax reform, Campos Neto said that simplification and removal of distortions greatly help the country’s economic scenario. He assessed that the tax burden in the country is very high and there is little room to increase it further.
“It (load) is at that point where, if it increases, revenue decreases”, he said, reinforcing that Brazil is very close to this point. The BC president reinforced that growth policies can improve the tax burden in the country.
