Editorial: Presidential Candidates Downplay the Economic Situation, but Government Will Have Problems

10/20/2014 - 08h42

If it depends on the debates between the presidential candidates or their political advertisements on TV paid for by taxpayers, electors will vote next Sunday, October 26, with little information on the thin economic limits in which Brazil will have to be governed.

The present difficulties, however, are as certain as the country's need to register growth rates consistent with the future that the country expects for itself.

Things aren't going well. From 2011 to 2014, our economy will have grown at an annual rate of 1.6%. The income per capita will have climbed 0.7% per year - at that pace, it will double only after 100 years.

Perhaps that isn't a problem for countries whose G.D.P. per capita is over US$ 40,000 a year, such as the U.S., Germany and Sweden. For Brazil and its average US$ 11,000, having spent the past four years stagnant, it's lamentable.

To take on the development challenges of a society that will approach 230 million inhabitants in 30 years, the slow pace of the Brazilian per capita income needs to increase four-fold. That means increasing the G.D.P. by 3.5% a year, on average.

The two presidential candidates surely agree with that mandate. However, when they should assign the means they defend and the commitments they agree to undertake to reach that result, neither of them offers an acceptable answer.

The most frustrating initiative came from President Dilma Rousseff (PT). The articles that she published and the texts she disclosed as her government program are no different from publicity pamphlets.

The self-criticism of the misguided way the economy has been conducted in the past four years can only be read between the sterile lines of slogans like "New government, new ideas" or "More changes, more future." They also are implicit in the unusual attitude of announcing the firing of her Finance minister if she is reelected.

Ironically, in her plan delivered to the Electoral Court, one of the highlights is the idea of a solid economic policy, "unrelenting fight against inflation which will allow robust and sustainable economic and social growth." Her guideline isn't in accordance with her performance in office.

Senator Aécio Neves (PSDB) is worried about satisfying the voters' right to know part of what he will do regarding the economy.

For example, he agrees to guarantee autonomy for the Central Bank, try to reach the inflation target and reduce it throughout his administration, and to balance tax collection and expenses (including with camouflaged subsidies in public banks) in order to reduce the public deficit.

Neves, however, tries to deceive his audience with the idea that his taking office will provoke a "shock" of credibility capable of setting the country's main economic problems on track. It's a fallacy that helps to create a smoke screen over his real agenda.

The current economic policy's productive semi stagnation and imbalances will demand costly and unpopular decisions from whomever is elected.

In the face of the candor shown by both Neves and Rousseff, and considering the division among voters, we can foresee a wave of popular disappointment with the president in the next two years, at least.

Disappointment will come, for example, because the choice to recover the federal government's dilapidated savings account index (the so-called fiscal surplus) implies increasing taxes.

The tax burden already is very high, but leaving everything as it is will lead to further deterioration of public finances, a rise in the government's debt and an increase in interest rates for all of society.

Another dilemma that will be frowned upon involves electric energy and fuel. A significant rise in electric bills and pump prices seems inevitable, which leads to important impacts on inflation.

The candidates have avoided that subject to win the votes of those who might criticize them in the future.

If the immediate management of economic subjects is exhausting, the same can be said of structural development themes. Neither Neves nor Rousseff has said a word on how they will deal with social security. It is, however, one of Brazil's greatest social expenses.

The need for resources and the difficulty to find them will only increase as the population gets older; there are clear distortions, such as the expenses with the death and retirement of public servants; the scheduled increase in the minimum wage implies a mandatory rise in the share of G.D.P. used by the government.

The candidates have remained silent on the subject, as if it were unimportant. However, if nothing is done regarding all those points, Brazil will grow less in the near future, because there will not be enough money to invest in production and education, two sectors that are directly linked to a virtuous cycle.

Brazil will only be rid of the curse of low growth - and of spending a century in the club of average-income countries - with a continuous and significant grow in the quantity of goods and services produced per worker.

It won't be easy and the blithe omission and lack of commitment that the candidates have shown in the campaign will only make the disillusions more bitter in the next years.

Translated by THOMAS MUELLO

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