The government took advantage of the annual lunch of the banks’ federation, Febraban, to try to put out the fire caused by the fiscal package launched on Wednesday (27). Reactions to the package led the dollar to touch R$ 6.10 and the expectation of future interest indicating a Selic close to 15% at the end of the current cycle of rising interest rates.
This Friday’s lunch (29), scheduled months ago, brought the government and the cream of the financial sector at the same table – which fired acid and scathing criticisms of the package. In the view of the economic elite, the measures, which were supposed to demonstrate austerity, ended up being drowned out by new tax benefits with uncertain costs.
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Shortly before the Minister of Finance, Fernando Haddad, took the stage at One Rooftop, in the west zone of São Paulo, the presidents of the Chamber, Arthur Lira, and the Senate, Rodrigo Pacheco, made public statements in support of the package, with a important caveat: the Income Tax reform will be postponed until next year. It was the proposal to exempt income tax for those earning up to R$5,000 a month that soured Faria Lima’s taste buds.
At the opening of lunch – for which the InvestNews was invited – Luiz Carlos Trabuco Cappi, chairman of the board of Febraban and Bradesco, helped to lower the temperature. He highlighted the government’s efforts to advance the fiscal agenda and said that bankers are engaged and committed to the issue.
In his speech, the Minister of Finance cordially disagreed with Faria Lima’s reactions. For Haddad, the market lacks “a bit of caution in the analysis”.
“If there is discomfort, let’s go back to the discussion table. But people need to analyze it line by line (…). There is no silver bullet. And we can move forward with other measures in the coming months.”
On several occasions, Haddad drew attention to the fact that the Executive has a set of tools to use, but the Judiciary and Legislature must also be committed to the fiscal issue.
At lunch, Haddad and Gabriel Galípolo, director and future president of the Central Bank, showed great harmony. Both admitted that there is a lack of anchoring in expectations, especially in relation to interest rates and inflation.
This is perhaps the government’s biggest challenge at the moment.
There is no point looking at a low unemployment rate, economic growth of around 3.5% or a 10.5% increase in credit granting. If people think things are getting worse and will get even worse, they increase their prices, hesitate when deciding on an investment, and send their resources abroad.
READ ALSO: In a meeting with Galípolo, businesspeople criticize taxes and interest rates: “We are screwed”
With distrust and discouragement, the measures proposed by the economic team have little effect. The government’s “firefighter operation”, for now, is just that: an attack on the fires. But the fire is far from under control.
