On the day that the package of fiscal measures made financial markets tremble, the future president of the Central Bank and current director of Monetary Policy, Gabriel Galipolo, met with a group of important businessmen in São Paulo. And, as expected, he heard criticism – and a kind of outburst – from representatives of some of the largest corporations in the country.
“We are screwed,” said Rubens Ometto, from the Cosan group. At the beginning of this year, the businessman had already taken a very critical tone towards fiscal policy – especially the government’s tax collection efforts. And this Thursday (28), he repeated the dose. He said that the increase in interest rates, caused by the fiscal knot, will discourage investments, including those aimed at infrastructure – widely expected by the government.
“A businessman who invests money with this interest will go bankrupt. This will generate demand inflation, because there will be no product.”
Rubens Ometto
The meeting with Galípolo was promoted by Esfera Brasil, and brought together approximately 50 businesspeople at the home of João Camargo, president of the organization. In addition to Ometto, names such as Joesley Batista (J&F), Fabio Ermínio de Moraes (Votorantim Cimentos), Eugênio Mattar (Localiza), Carlos Jereissati (Iguatemi), Rui Chammas (ISA Energia) and André Esteves (BTG).
The date for dinner at João Camargo’s house had already been booked a few weeks ago. But it was only confirmed on the BC agenda on Wednesday, the day the package was announced. And, given the market’s reaction to the measures, Galípolo’s attendance was almost an act of courage. In addition to the torrential rain that made access to the Morumbi neighborhood, location of the event, even more complicated, the BC director, one of the four appointed by President Lula, had to face an audience that was very dissatisfied with the measures announced by the government. And, mainly, with the reaction of financial assets to the package.
There were many complaints about the level of interest. One of them came from Rubens Menin, president of MRV Investimentos, one of the leaders in the affordable housing construction market. “Companies only have so much to withstand (high interest rates),” he said.
The BC director was also asked to give his opinion on the government’s measures and the market’s reaction. And also asked about the degree of freedom, or autonomy, that the BC will have to respond to all of this – a real fair deal for someone who was recently appointed to command the BC by President Lula.
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Galípolo did not go off script. Humorously and using some of the metaphors that have become his trademark, the director repeatedly stated that his commitment is to meet the inflation target. He said that the role of the BC is to administer the bitter medicine to the patient, but that it is necessary to simultaneously identify the causes of the disease (inflation).
“Do we want to live with huge doses for decades? Or should we deal with the causes of the disease?”, he stated. But at no point did he mention fiscal policy as one of these causes
Galípolo stuck to the speech that has been said for weeks by him and other members of the BC: the economy is booming, and the job market is booming. Activity grows above equilibrium. With all this, “it is logical to assume that you will need a more contractionary interest rate for the same fiscal impulse”, he stated.
But the BC director made a small concession. Without directly mentioning the package announced on Wednesday (27) or its impact on the market, he quickly defended the Minister of Finance, Fernando Haddad. “I am convinced of my friend Fernando Haddad’s commitment to addressing these issues. And if Fernando is convinced that this is right for society, he buys the fight and goes to the end.”
