Economist, Lula supporter, says there is “clear deterioration in public accounts”

Economist Armínio Fraga, former president of the Central Bank, who supported President Luiz Inácio Lula da Silva in the last election, found the data from the risk rating agency strange. Moody’s which improved the outlook for the Brazilian government’s credit rating.

For Fraga, Brazil should have been demoted, like several other countries in the world, such as the United States, which have been careless in controlling public accounts. He stated that the country presents “an explicit, but already very well perceived, deterioration in the field of public finances.”

“I was surprised by Moody’s decision to give upgrade to Brazil. This classification has to do with the country’s ability to honor its external commitments. But other than that, I think Brazil should have been relegated. We have an explicit, but already very well perceived, deterioration in the field of public finances”, he stated in an interview with Estadãopublished this Monday (6).

The country’s current rating indicates a greater risk for foreign investments. With the change in outlook, the agency signals that it may raise the rating in the future.

Moody’s emphasized the importance of maintaining the credibility of the fiscal framework to “reduce uncertainty about the fiscal trajectory.” The agency pointed out that the Ba2 rating is “based on Brazil’s still relatively weak fiscal strength, given the country’s high level of debt and its weak debt repayment capacity, which remains sensitive to economic or financial shocks.”

Another criticism made by the economist was in relation to the framework presented by the Minister of Finance, Fernando Haddad. According to him, the measure “is not working” and also pointed out that Brazil has presented a “blatant difficulty” in the fiscal area.

“It has not been a path of progress. It has not been until now. I was one of the first to publicly support the framework that Minister Fernando Haddad presented, essentially because what he did was a movement in a direction contrary to what the President of the Republic had been defending It was admirable. But it’s not working,” said Fraga. And he added: “Brazil is not Venezuela or Argentina, but there is nothing that signals that we are going to enter a more accelerated and sustainable growth process.”

Regarding the flexibility of the framework to contain expenses, such as the minimum wage and health and education floors, the economist assesses that the situation represents “a huge problem of lack of priority in public spending”. “It’s a fragile situation. At some point it will have to be rethought, but I’m afraid that won’t happen during the current government. And I fear that this could generate economic frustration and a political reversal in the future,” he said.

The economist also highlighted that the worsening of public accounts could perhaps lead to a reversal not only economically, but also politically, in the future. “If it is a reversal (policy) Moderate, fine. Move from center-left to center-right. But if it is a government that moves further to the left and produces a reaction towards the extreme right, that would be a disgrace,” he declared.