Haddad defends treating RS debt as a priority and maintaining current negotiations with other states | Policy

The Minister of Finance, Fernando Haddad, defended this Wednesday (8) that the government quickly define, this week, rules for the suspension of debt payments in Rio Grande do Sul (RS), which is facing a state of public calamity due to due to heavy rains in the region.

But he added that other states in financial difficulties, such as Minas Gerais, Rio de Janeiro and even São Paulo — whose situation is not so bad, but which has a high level of debt — continue negotiating separately, more calmly.

“What we are going to do this week is send a proposal to resolve the problem of Rio Grande do Sul at this specific moment, as we need to respond and there is no time to waste. This will not make it impossible to continue negotiations with the other governors, who are not being affected by the climate crisis right now”, declared Haddad, in an interview with EBC’s “Good morning, minister” program.

According to him, it is necessary to separate the two topics, that is, when one state faces a calamity situation, and the other is the normal renegotiation of the states’ debt — a discussion already opened by the economic team and which is ongoing.

“The Palace’s proposal is to create a rule for cases of calamity. I hope that this climate crisis is faced, and that we don’t see this again, but scientists are saying that extreme events will happen more frequently. So, what we sent to the Palace about the possibility of activating this type of mechanism in the future, it is preventive. Another issue is debt renegotiation, something that is ongoing and that, from my point of view, is not worth mixing”, added the finance Minister.

• However, the Minister of Finance did not want to set a level of interest reduction this Wednesday. “I expect an interest rate cut today so that we can continue building a healthier economy,” he declared.
• In your view, “the interest rate [brasileira] remains one of the highest in the world, and inflation in March and forecast for April behaved very well”.

• The market’s expectation for a smaller cut in interest rates this week came after President Lula’s economic team proposed a reduction in targets for public accounts this year.
• With the reduction of fiscal targets, the space that the government can obtain for new public spending is around R$161 billion over the two years — which could further boost inflation.
• Furthermore, the external scenario is also more tense and uncertain due to the postponement and reduction of space for interest rate cuts in developed economies — such as the United States.
• Analysts estimate that this reduces the space for interest rate cuts in emerging economies, under the risk of pressure on the exchange rate — which is also bad for inflation.

“I’m sure we did our part, we appointed four high-level directors [ao Banco Central, que participam da definição da taxa de juros], with an impeccable reputation. I respect the other directors who are there, I don’t know what will happen today”, added Minister Haddad.