Credit card, More Refrigerators and Lula’s ‘pop’ project – 07/15/2023 – Vinicius Torres Freire

A few months ago, the government, BC (Central Bank) and banks said they were talking about what could be done with interest rates, such as credit card rates, especially the revolving one, at 455.09% per year. The government can do almost nothing, if anything, but would (the “political wing”) like to see some announcement about it. Banks are discussing a way to put an end to revolving credit on the card, a line that would be replaced by an automatic installment of the debt slice that is not paid in the month.

President Luiz Inácio Lula da Silva has demanded more “pop” measures. Not by chance, last week the idea of ​​a kind of “More Refrigerators” program, tax rebates for household appliances, was floated on the air.

Also last week, Minister Márcio França (Ports and Airports) told this Sheet that “Voa Brasil”, starts in August. There is no government money and it is an attempt to sell empty seats on commercial planes for R$200.

The week also saw the announcement that Desenrola is going to start, which takes time and, therefore, causes “growing frustration” in Lula, as a close aide says. It’s just “track 2” of the program, the direct renegotiation of debts between banks and clients with higher incomes.

The “Popular” Deployment, which takes the indebted mass, should come in September, if technical problems of the platform for selling and renegotiating debts are resolved. The program can have a relevant effect and was well thought out. At a relatively low cost (a maximum of BRL 10 billion in subsidies over five years), it can eliminate debts of some BRL 50 billion.

The rest is very small palliative, if that, or demagogic nonsense, like “More Refrigerators”, younger cousin of “More Cars”. The entire country paid up to BRL 800 million for 95,000 people and 30,000 CNPJs to buy a car at a discount (which, in part, they would buy anyway). The industry is still the same, as is the economy, and there was a better alternative to cash.

The silliness was only not greater because the Farm limited the size of the damage. Now, ministers are trying to find a way to contain the damage of “More Refrigerators” or bury it. Later on, they will try to avoid fulfilling Lula’s promise to exempt people earning up to R$5,000 from Income Tax.

Criticism of this type of measure causes revolt. The potential beneficiaries believe, as do Lula and people from the PT, that all it takes is “political will” to make life better (cut taxes, set prices and interest rates, etc.). If that were the case, even the inept and unscrupulous government of darkness would have done it (it tried, leaving gaps in the public accounts that the Lula government has to manage).

“Tax the richest”! Yes, it is necessary. However, not to give a IR discount or spend on demagoguery that won’t make growth itch. The extra tax would cover government deficits, lessening the need to borrow (from the same rich) at horrible interest rates. This will be the biggest macroeconomic problem of the Lula government, from now on; if forwarded, it may contribute to the drop in interest rates and to the increase in productive investment.

As for other plans, people in the government say that the “green transition” plan is on the verge of being released, which may turn out to be a well-thought-out intervention, but of which nothing is known.

Deep institutional changes are abstract, unintelligible and take time to take effect (such as the fiscal plan, the Tax Reform, the law of guarantees, things that the government has been doing or encouraging). Then comes the temptation of demagoguery, sometimes allied to a genuine but ignored belief. The risk is that of leaving for ignorance on a large scale, creating inefficiencies, blowing up public accounts and, therefore, the perspective of growth.

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