Friday , October 22 2021

"We can not ignore the size of the fiscal challenge," warns Guardia


Finance Minister Eduardo Guardia captured the dinner this week to get future economist Paulo Guedes to Senate President Eunice Oliveira (MDB-CE). The relationship had been tense according to Guede's statement that a "press" was needed in Congress to approve the pension reform.

For Guardia, this approximation was important because of the agenda in Congress until the end of the year, including the tough mission statement and the preliminary action that unlocks the Amazon Energia auction. Guardia gave the following interview View forum posts:

Mr. helped to tailor the approach of Senate President Eunicio Oliveira to future Minister Paulo Guedes. Was the excitement (provoked by Guede's statement that a "press" in Congress to vote for welfare was necessary) decreased?

I thought it was important to do this to try to restore a good dialogue, otherwise we could not do anything else this year. There was concern that we would send parliamentarians to the electricity sector, as we did. It is an attempt to make the privatization of Amazon's Distribuidora feasible. Without privatization of the Amazon and Ceal (by Alagoas), Eletrobrás will no longer run the business. We needed a way out to ensure operational continuity in parallel with the company's liquidation process. It was very important a channel with Guedes with Eunice on the agenda from now to the end of the year.

Will President Eunicio really accelerate the vote on the tough mission statement (which unlocks the auction of sales areas next year)?

He understands the importance. Guedes emphasized the importance of this. The point that has been discussed is that Eunice has set the need to divide the resources collected with the auction with states and municipalities. Guedes is open to this discussion.

And how would it share?

This is an important point. I have said the following: Guedes shows here a direction towards increased decentralization of resources in favor of states and municipalities. Okay. But on the other hand, we have a very serious fiscal problem in the Union that can not be taken into account. Let us remember that in 2019 we have an imbalance in the so-called "golden rule" (which prohibits the Union from borrowing to pay current expenses, such as salaries) is forecast to be $ 258 billion. And part of the solution to reduce that gap goes through auction revenue.

So what should you do?

If you want to decentralize resources, you must maintain the Union's tax situation. Instead of giving an additional percentage of auction results to the states and municipalities, we can transfer the resources allocated to the Social Fund to obtain some of the pre-salt resources to be used in areas such as education and health). This cost, which would be through the Union, is transferred to states and municipalities, to apply directly for measures similar to the Social Fund.

What would the split look like?

According to the rule, some of the money from the auction must be transferred to royalties and a part to the Social Fund. The rest is from the Union. The idea is to take the share of resources that would go to the Social Fund, and it would be spent by the federal government and transfer this money to states and municipalities. Guedes is talking about decentralization. We will decentralize, but without worsening the Union's tax situation. Decentralization does not increase expenses for anyone.

What mr Would you like to avoid this suggestion?

Do not spend beyond what is already planned in today's rule. This is my point. Decentralizes spending, but from the federal government's point of view it is no longer spent. We have a monumental financial problem. And if you move towards decentralization, which is what Guedes wants. It would be fiscal neutral. We can not ignore the size of the fiscal challenge issue 2019.

But are not states in bad situation too?

We released a report this week showing that the state problem lies in the growth of staff costs and non-approval of the welfare reform. You can not throw more money there to give salary adjustments and continue to retire at the age of 53. By 2016, we were forced to renegotiate the sovereign debt by the highest determination. We have waived the payment. And what happened? Increased staff costs. We need to face the root problem, which is the growth of active and inactive staff costs. You can not play money without contradicting the adjustment.

What is the solution to the problem with states?

Review personnel check and a relevant review of the tax benefits that continue to be granted (from the states to companies that want to settle there). The loss of income due to these benefits is very high. The tax war is not over and must be addressed.

The states focus on the adjustment in debt securitization (conversion of debt in public bonds to be sold on the market).

The person who securitizes and gets a buyer for credit can already do it today. You do not have to change anything. But I do not think it will be too relevant to solve the problem.

The states want to change the Fiscal Responsibility Law (LRF). What mr do you think so

I am deeply concerned about the change in the LRF. Every change must be done carefully so that important tax treatment rules we have today are not relaxed. If you know how the discussion begins, you do not know how it ends. If there are any changes, there are several technical adjustments to be made. The problem is to submit a proposal for technical adjustment and stop leaving with the flexibility of the tax control rule.

Will the Temer government send the reform of PIS and Cofins to Congress?

For Congress, no. What we are going to present is the project for Guedes.

What mr Do you want to do when leaving the farm?

I go out of public activity and back to the private sector.

The information is from the newspaper States S. Paulo.

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