BRAZIL-Dilma said it was overestimated!

It was only 76.5%!!

The Temer administration has come out with its calculation of the 2016 budget deficit – initially estimated by the Rousseff administration at R$96.6 billion. The new figure is R$170.5 billion. Well, that’s only a 76.5% error. Moreover, Dilma Rousseff, who claims to have an advanced degree in Economics was quoted that Temer’s economic team has clearly overestimated the amount.

The president of the PT, Rui Falcão recently made a public announcement that over the past 13 years in power the PT could have, possibly, but not intentionally, and certainly not with malice, made a mistake or two but then, nobody’s perfect. Kinda makes you wonder if a 76.5% shortfall in the estimate of the 2016 budget was one of those innocent mistakes he was talking about. He was not specifically specific!

The figure caught the Temer team by surprise (sort of). However, some analysts suggest that the deficit might even be greater – i.e. on the order of R$200 billion.

Given the magnitudes involved, I guess the estimated shortfall doesn’t make a helluva lot of difference as regards short-term policy measures. Either figure suggests a relatively long “convalescence” after getting the fiscal accounts out of the intensive care unit.

As I mentioned in a previous post, Temer’s main short-term challenge is not figuring out what to do, it’s trying to get a revised budget estimate through the legislature without having to give up too much for support. 

Some “hungry” legislators tend to understand an appproval of the revised measure as a sign that the government can spend more so they ask for appointments for their cronies. (It’s that “behind the looking glass” logic again!). The vultures continue to hover over the moribund economy on the assumption that there will be something left to eat after it draws its last breath.

That, of course, begs the question of what’s next?

This is not to say that there are not some positive signs in the economy. One is the entrepreneurial spirit of the young unemployed (not that they have a lot of choice).

With an unemployment rate that is roughly twice the national average, many in the 18-24 age group have taken to setting up their own businesses. Some have been enormously innovative such as the young man who decided to manufacture furniture. 

Being part of the “Millenium” generation, the computer savvy young man decided to use the Internet to find other young “struggling professionals” in design and architecture in other parts of the world to venture with him to provide a high-quality product. He has been quite successful and stated that he no longer intends to run out looking for a job. 

Others have also used “connectivity” to sell their products and services. This population cohort can reach out to contacts virtually anywhere in the world to get advice, customers, market information and virtually free advertising just by using their smart phones or computer devices. More than just a few have been interviewed by the press and have stated that they find their new circumstances and enterprises more interesting than a 9-to-5 job.

Woe to the politician who tries to confiscate the economic rents of this group!! And some of those fledgling companies might be interesting targets for venture capitalists and equity funds!

Those companies are, of course, only seeds or tender shoots emerging from fertile soil. But they reflect a kind of chagrined “optimism” not unlike that described by Adam Smith and the worldly philosophers of the 18^th century. Unable to rely on anything but their own resources, they “truck, barter and trade” their way to prosperity. It’s what the generation before them, and most vociferously the PT, disparaged as the “liberal” model.

Maybe a sea change in attitudes is building in Brazil!

It’s too bad, perhaps, that the PT was too ideologically obtuse to recognize this dynamic!