BRAZIL- Get ready, get set, GO!

Transparency is not an issue

For those willing to look, it’s not difficult to see through the public statements of the administration to what lies behind. The government is as transparent as glass!

It was reported today that the administration plans to expand credit to jump start the economy (as promised previously) by relying on the public banks and the workers’ indemnity fund (FGTS).

According to Finance Minister Nelson Barbosa, the public banks (Caixa Economica, BNDES, Banco do Brasil, and FGTS) have liquidity and can be used to expand credit to priority areas as determined by the administration. That does not seem to match the statements made by former Finance Minister Joaquim Levy at the end of 2015 but I guess the government found some money after all.

However, if the public banks are liquid, it is reasonable to ask why the low-cost housing program Minha Casa-Minha Vida relied on the FGTS for 80% of its funding in 2015. The FGTS money belongs to the workers and employers who contribute to the Fund. Using that money is much like the time that the US Congress puts is paws on the US Social Security Fund.

It is also interesting to note that individual workers can draw on the FGTS fund to purchase a home. Kind of suggests a bureaucratic redundancy, no?

Moreover, numerous Minha Casa – Minha Vida projects are currently suspended because the builders have not been paid by the government and they have been cut off by their suppliers.

The new Finance Minister also announced that the credit expansion program will apply to infrastructure programs, working capital for small companies, and public sanitation projects. The rates charged are expected to be lower than market rates but will not be “subsidized”. No one has explained how that will happen. Is it possible that a “free lunch” actually does exist?

Nevertheless, the administration claims that it will carry out its fiscal adjustment program and generate a primary budget surplus (revenues less expenses before interest) of 0.5% of GDP in 2016. (Okaaay!).

It’s not quite clear yet exactly how this is to be accomplished, but the government says it willbe. “Various measures” were said to be under consideration. (Now it’s clear!)

Analysis:

It would appear that the administration is off to a rather inauspicious start.

The Finance Minister informed in an interview that the first thing to do is to make things “more predictable” with regard to the fiscal accounts. “Various measures under consideration” is, I suppose, meant to make things more predictable. I guess the message is that there is a plan out there somewhere.

It sounds a lot like the familiar “trust me!”

I guess the more things change, the more they stay the same!