Government ignores projects that can improve business environment

Projects that are stalled in Congress, far from the spotlight and ignored by the new government, have the potential to contribute to improving the business environment, increasing productivity and making life easier for companies and entrepreneurs.

They are, for the most part, measures presented in the second half of the Jair Bolsonaro (PL) government and which have in common the benefits they can provide, such as legal security, reduction of bureaucracy, combating distortions in the Brazilian economy and increasing efficiency in the resource allocation.

There are at least six projects with these characteristics, four of which have already been approved by the plenary of the Chamber, and still depend on analysis by the Senate. Another proposal has already received the endorsement of the senators, and needs to go through the scrutiny of the deputies.

The biggest obstacle to this agenda is precisely the lack of interest from the government of Luiz Inácio Lula da Silva (PT), which prefers other approaches to stimulate economic growth – among them, the direct role of the State in the economy.

Among the projects are:

• PL 414/21: Modernization of the electricity sector (approved by the Senate)
• PL 4188/21: New Framework of Guarantees (approved by the Chamber)
• PL 1583/22: Authorizes the Union to assign the right to the portion of the pre-salt oil surplus (stopped at the Economic Development Commission of the Chamber)
• PL 591/21: Privatization of the Post Office (approved by the Chamber)
• PL 3729/04: Simplification of environmental licensing (approved by the Chamber)
• PL 6726/16: Combating super wages (approved by the Chamber)

According to the coordinator of the Mackenzie Center for Economic Freedom, Vladimir Fernandes Maciel, these are crucial issues to ensure an increase in the supply of goods and services, which helps combat inflation, and the growth of per capita GDP, which has been practically stagnant for 40 years. years.

“They have some points in common, such as increasing legal certainty and predictability and reducing uncertainties and bureaucracy so that the private sector can provide resources and invest, mainly in the infrastructure sector”, says Maciel, who is also a professor of the master’s degree. in Economics and Markets from Universidade Presbiteriana Mackenzie.

“Basically, they make the business environment favorable to investment by the private sector, ensuring that ‘surprises’ do not occur throughout the process and the contract”, he adds.

The measures are part of the microeconomic agenda, which, according to specialists interviewed by the People’s Gazette, is as relevant as the macroeconomic one, because it concerns the efficiency of the economy. “The existing distortions end up affecting the formation of a favorable environment for companies”, says researcher Fernando Veloso, from the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre/FGV).

Privatization of the Postal Service has no chance in the Lula government

One of the proposals, approved in the Chamber, and which for now has no chance of going ahead, is the privatization of the Post Office. The new government, which defends the State’s active participation in the economy, withdrew the company from the National Privatization Program.

The Correios monopoly is an issue that in the coming months may go to trial at the Federal Supreme Court (STF). A lawsuit filed almost 20 years ago that questions the behavior of the state-owned company was withdrawn from the judgment agenda on March 1st and is awaiting rescheduling.

“In Brazil, Correios has a monopoly on many postal services, which limits the entry of other companies in the market and prevents competition. This can hinder innovation and the creation of new business models”, says Diogo Costa, CEO of Instituto Millenium, an organization that defends liberal values ​​such as the market economy.

Legal Framework of Guarantees may reduce interest

While the government is pressing for a drop in interest rates and adopts disastrous measures such as the pen to reduce the INSS payroll-deductible rate, a proposal is awaiting a vote in the Senate that has the potential to structurally reduce the cost of credit in the country, and with that significantly increase the granting of loans and financing: the New Legal Framework for Guarantees.

According to calculations made by the Ministry of Economy in the Bolsonaro government, the possibility of using a real estate guarantee, which would be facilitated with the new framework, can reduce the value of the monthly installment of a loan by up to 37%.

Veloso, from Ibre, points out that one of the potential effects of this measure is to reduce spreads of the financial market – that is, the difference between the funding cost of banks and the interest they charge customers.

“It is a measure that makes micro and small companies more competitive, which, most of the time, cannot offer good guarantees”, says Veloso.

According to the Central Bank, the average difference for credit operations with free resources was 30.61 percentage points, on average, in January, the highest since August 2019. For companies, the average spread was 12.63 points percentage points, while for individuals, 43.54 percentage points.

The measure would add to other advances in the financial system, which began between 2016 and 2017, in the Temer government, with the implementation of the Long Term Rate (TLP) at the BNDES – which eliminated subsidies and lowered the economy’s neutral interest rate –, the creation of the positive register and the implementation of “open finance”.

Modernization of the electricity sector would give more freedom to the consumer

The electric sector modernization project, which provides freedom for energy consumers to choose their supplier, has already passed through the Senate and has to be analyzed by the Chamber. For Veloso, he ensures greater competition in the area. “The price of electricity in Brazil is highly regulated”, says Veloso.

The measure can also help to lower the price of the input, which is one of the most expensive in the world. Industry stands out as one of the sectors most benefited by the proposal.

Combating super wages in civil service

One of the most consolidated proposals is the one that regulates civil service salaries. The project was presented in 2016, in the Senate. It was approved in the same year and in 2021 it received the approval of the Chamber, with modifications. Since then, it has been waiting for the final analysis of the senators.

The project regulates the rules for the payment of additional salaries to civil servants, in order to guarantee the application of the remuneration ceiling, which today is equivalent to the salary of a minister of the STF, currently at R$ 41,650.92.

The objective is to define, among the so-called “twists”, the installments that are of a remunerative nature and that, therefore, must be added to the base salary for the incidence of the ceiling.

environmental licensing

Another measure that has already passed through the Chamber and is awaiting a vote in the Senate is the PL for Environmental Licensing, which dates from 2004. The text eliminates the need for licensing for basic sanitation works, maintenance of roads and ports, energy distribution networks, activities military and emergency infrastructure works. It also allows the authorities to waive licensing for works of insignificant size.

Veloso, from Ibre, says that Brazil has competitive advantages in the environmental area. “It is necessary that the analyzes are carried out with balance, that they do not become bureaucratic and that the granting of licenses does not take time”, he says.

Sale of the government’s share in the pre-salt sharing fields

The Bolsonaro government sent Congress, in June last year, PL 1583, which allows the Union to sell in advance the oil and natural gas allocated to it in production sharing contracts. In practice, this would correspond to the privatization of PPSA, the state-owned company in charge of marketing the Union’s share in the pre-salt layer.

Under the proposal, which is in the Economic Development Commission (CDE), and had the last movement on August 2, 2022, when the period of five sessions for the presentation of amendments to the project ended, the assignment of Union rights would be made by bidding, provided there was consent by the consortium operating each contract.

As this is oil and gas that will still be produced, it is possible that there will be a discount (discount) in relation to the current prices of these commodities.

Even so, the potential revenue for the Union reaches R$ 390 billion, according to calculations made in the last government. In addition to being quite a reinforcement for federal revenues at a time when the new fiscal framework depends precisely on them, anticipation reduces, for public accounts, the risk related to future changes in oil prices.

Political space for approval is restricted

The Mackenzie professor points out that to unlock these projects in the Legislative, it is necessary for the Executive, through the government caucus, to put energy and priority in approval. However, he does not see a favorable scenario for this.

“It is not an agenda of the current government. The current agenda, which has not yet been clearly announced, but which has been taking shape little by little, has a macroeconomic and statist bias and not a microeconomic and pro-environment bias for business and the private sector,” he says.

For Maciel, the ideal path is to strengthen legal frameworks. This passes through the Executive Branch. “He must strive to put them into practice and exercise them,” he says.

Another challenge, in his assessment, is to guarantee legal certainty – which mainly involves the Judiciary. “It is necessary to respect and comply with signed contracts, political independence of the Judiciary, modern legal practices, reduction of judicialization and alteration of the modus operandi of the Judiciary. He cannot legislate, it is not the role of the Judiciary, but of the Legislature.”