Farm maintains secrecy for study on inflation targets – 05/20/2023 – Market

Fernando Haddad’s Ministry of Finance maintains secrecy for a technical study that supported the drop in the inflation target to the 3% floor during the management of Paulo Guedes. Currently, this percentage is the subject of divergences. Economists who learned about the secrecy were concerned about the lack of transparency and questioned that withholding information impoverishes the debate on the subject.

Secrets of public documents have become a routine in the management of Jair Bolsonaro (PL). The government of Luiz Inácio Lula da Silva (PT) has undertaken to review them. 254 processes have already been reassessed at the CGU (Controladoria Geral da União).

In this context, keeping an econometric study confidential is considered nonsense.

The discussion about inflation and how to fight it has been intense in this beginning of the government. Lula has already stated that if the inflation target is wrong, change the target. Members of the government have already aired this possibility. In recent days, Minister Haddad spoke again that perhaps it is time to change the target period.

The target regime has been considered a success in Brazil since its implementation in 1999, as it helps to anchor expectations. According to economist José Júlio Sena, from FGV Ibre, the simple fact that the regime obliges the government to specify a numerical objective for inflation prevents it from thinking about high values.

“There does not seem to be an alternative regime. It is the system that suits us. Even in the period when monetary policy management left something to be desired, when interest rates were cut sharply without justification [em 2011]helped to avoid the worst”, says Sena.

Currently, the inflation targets for this year, 2024 and 2025 remain, respectively, at 3.25%, 3% and 3%, with a tolerance interval of 1.5 percentage points more or less.

Those who follow the theme say that withholding a study that deals with the setting of these values ​​hinders a better analysis of when and why to raise or lower the targets.

“A study that shows the optimal inflation target in an economy like Brazil’s has to be made public, and specialists have to issue opinions, criticize, make suggestions. It’s impossible to understand this secrecy”, says Samuel Pessoa, a researcher in the area of ​​economics. and columnist for Sheet.

Surveys of this type are not common, explains researcher Braúlio Borges, senior economist at LCA.

“Between 2000 and 2019, no study had supported decisions on targets. In 2021 a study was carried out, but it is not public and will remain confidential. We remain the same.”

Borges personally tried to get the study. In February of this year, he co-authored an article that defended raising the inflation target. In the text, he pondered that this indicator is usually reviewed at random, without studies to support the changes in the CMN (National Monetary Council).

The text had a lot of repercussions. Members of Paulo Guedes’ management disclosed among their colleagues that a study had indeed been carried out to support the reduction of the target from 3.25% to 3% at the CMN meeting on June 24, 2021. Borges then went in search of the document through the LAI (Access to Information Law).

In the first response, the Treasury SPE (Secretary of Economic Policy) denied the existence of the study. Borges appealed. Then came the reply that the study existed, but it had been classified for five years.

The report of Sheet was informed that there was a possibility that the PPT (PowerPoint of the presentation), used in the CMN meeting, would not be confidential and also made the request via the Access Law. In the first response, she was informed about secrecy.

On appeal, the Sheet argued that the sole paragraph of art. 20 of Decree No. 7724 provided for the release of preparatory documents after their use. The head of the SPE cabinet replied that the study could be used in other discussions, which justified maintaining confidentiality.

“The PPT of the requested study deals with inflation targets in a comprehensive way, not for a specific year, and can also be used for decision-making. Therefore, it must remain classified as confidential until the end of the 5-year period stipulated in the act of classification “, says the text.

The justification makes no sense, according to Fabiano Angélico, a researcher on issues of transparency and integrity at the University of Lugano, Switzerland, and author of the book “Access to Information Law: Strengthening Democratic Control”.

“In the legislation, the figure of the preparatory document can be kept confidential until the decision is taken”, says the expert. “The argument that it can be used in any meeting is a joke, because there is no preparatory document forever. This is a lack of transparency.”

Lawyer Bruno Morassutti, co-founder of Sejam Sabendo, an independent data agency specializing in LAI, says that secrecy can be reversed.

“The Minister of Finance, or his superior, the President of the Republic, or the joint information reassessment commission, a collegiate body that has competence to review this type of document, can remove the secrecy”, he says. “There is even a recommendation from the current government to review all the decisions of the previous government because it is known that there were problems in classifying information.”

People who had access to the study at the time say it is consistent and comprehensive. The PPT has about 70 pages with mathematical and theoretical models, international comparisons and simulations of the effects with different bands for the targets, for example.

The study used a DSGE model (Dynamic and Stochastic General Equilibrium) and came to the conclusion that the optimal target for 2024 should be lower than the forecast so far. The study also highlighted that the fiscal risk tends to unanchor expectations.

Two members of the previous government recall that secrecy was requested, but only until the CMN meeting, and they declared themselves surprised at the extension of the deadline.

According to a table passed on by the Ministry of Finance advisory, there are 197 different types of confidential document in its scope. Studies on targets are used recurrently in CMN meetings, which justifies secrecy, explained the body.

“The Secretariat for Economic Policy has not yet located all the documents referring to the model in question. If the set is located, a new assessment regarding its secrecy can be carried out’, informed the advisory.