Guilherme Mello: ecological transition is a strategic core – 07/17/2023 – Market

The elaboration of stimulus policies for specific sectors is useful to help companies in difficulty and stabilize the economy, but it is outside the core of the government’s development strategy, says the secretary of Economic Policy at the Ministry of Finance, Guilherme Mello.

In an interview with Sheethe says he has not yet received any order linked to the idea of ​​making the purchase of home appliances cheaper, publicly mentioned by President Luiz Inácio Lula da Silva (PT) in the wake of the program for popular cars.

Even if the discussion advances in the government, Mello points out that the plans announced so far have brought improvements in relation to past programs —many of which were criticized by economists for their low effectiveness.

“Eventually, there will be problems in one sector or another, perhaps it will have to act to balance and prevent a greater loss, as in the automobile sector, which employs a lot of people. But that is not the core of the strategy”, says the secretary.

According to him, the Executive’s focus is on the ecological transformation plan, which will have six main axes.

Will the government revise the GDP?
I can’t anticipate [o número], but it will have a positive revision, GDP will be higher than previously projected, and inflation will be slightly lower. Market projections point in the same direction.

In the first release, we made it clear that we had the prospect of a GDP slowdown, but not as strong as most of the market was considering. Our projections have proven to be quite realistic.

There is talk of an increase of 2.4%.
It’s statistical loading. If the country grows zero in the other three quarters, growth at the end of the year will still appear at 2.4%. Of course there are factors to consider. Agriculture was very strong in the first quarter, this should not be repeated. But we believe that growth will be very close to 2.5%, both for this year and next. With a question: the composition tends to change.

This year, agro will have a robust participation in the growth. It doesn’t mean it can’t be repeated next year, but it’s less predictable. What tends to be observed is a strengthening of domestic demand, with an impact on services and industry.

Why?
Confidence indicators already anticipate an improvement, and all the policies implemented so far have the characteristic of strengthening the domestic market.

New Bolsa Familia, minimum wage increase, correction in the Income Tax table are measures with enormous impact on family income. Unwinds and reduction of long interest rates, all this is impact on the credit market. And we hope that this will come together with the reduction of the basic interest rate in the next decisions [do Banco Central]. This has a decisive impact.

Companies and sectors that depend more on the credit market are the ones that are in greater difficulty today. Retail, for example, and the automobile sector itself, which has now been the target of a public policy.

President Lula mentioned the intention to make white line items cheaper, as done in the automotive sector.
It was a speech by the president, we are not sued yet.

There is always the fear of repeating past policies that did not work. Does it make sense to reissue the white line exemption?
Let’s take the example of the automobile industry. It is a short-term plan, which has a determined value and term. Don’t repeat the past. It is innovative and creative. First, by reserving a larger part of the resources for trucks and buses, with the idea of ​​replacing the old with the new, the pollutant with the more sustainable one. The way of implementation is also different. It’s not exempt, it’s using credit [tributário]with delimited value.

Is it possible to replicate the model in the white line?
Everything is possible. I don’t know what will be built, but all the policies that are coming back, whether the successful ones or the most criticized ones, are coming back with very relevant improvements.

Former president Dilma Rousseff said in 2017 that she regretted having made so many exemptions, which only increased corporate profits and compromised public finances. How to avoid the same outcome?
The policies implemented today have a design, in my view, superior to the policies of the past. The format itself in the case of cars ensured that the discount reached the consumer and encouraged competition among automakers so that they could also offer discounts. Is this the heart of the development strategy? Obviously not. We have structural reforms, a very important fiscal agenda, a sustainable development agenda. Eventually, it will have problems in one sector or another, perhaps it will have to act to balance and prevent a greater loss, as in the automobile sector, which employs a lot of people. But that is not the core of the strategy.

What will be the focus of the new plan of investments?
The new program will again strengthen public investment, with a greater emphasis than in the past on social and sustainable infrastructure. In the past, sustainability was seen as a cost. In the last government, as an enemy of the country. We like a huge opportunity.

We have a development strategy in the final stages of elaboration, which involves ecological transformation. The SPE coordinated the debates on the carbon market. The Treasury is discussing issuing sustainable sovereign bonds. We have a whole discussion of taxonomy, of the definition of what is considered sustainable. It has the six main axes of this ecological transformation plan.

Which ones are they?
Sustainable finance, technological densification, bioeconomy, energy transition, circular economy and new green infrastructure and adaptation.

And the taxonomy, what is it for?
It is a kind of dictionary that will define what sustainable practices are and what they are not. It is of enormous importance to avoid the so-called greenwashing [uma espécie de maquiagem verde]. Not to mention “I’m sustainable, I do this”, but “this” is not a sustainable practice. It will be important both in the set of incentives for certain activities and in what can be done to mitigate emissions.

Will there be a clear scope of what is or is not sustainable to direct resources and policies?
Exactly. It is like a living dictionary, which will adapt to new practices in the near future. It’s not something written in stone that will never change.

Europe took six years to make the taxonomy. We think that in up to two years it can finish.

We are discussing the volume of investments needed to carry out the ecological transformation, which is very high. The State alone cannot handle solving this problem. Therefore, it has to create adequate coordination between the public and the private.

And the green bonds, when will they be released?
Brazil returned to the international market with traditional dollar bonds. The second step is to carry out the first issue of sustainable sovereign bonds. The forecast is to do this in September.

How will the carbon credit market?
It sets an emissions cap, and all companies that emit more than that will be regulated. If you issue above the allowed quota, you can buy credit up to a certain limit. And then there are the volunteers. Sometimes the guy has a reserve or some sustainable activity, which captures carbon, he can sell credits.

the more he [o empresário] can buy from a non-regulated one, the less rigid the business is. There will be a lot of discussion [sobre a cota] from here until the passage of the law.

The Tax Reform was approved in the Chamber. What might be the economic impact?
Our undersecretary for Fiscal Policy, Débora Freire, carried out a study before the approval of the reform, which indicates a growth of at least 12% in 15 years. We will have to see how the final version of the reform turns out.

Secretary Bernard Appy told Folha that exceptions may impact the final rate. Do they also affect growth potential?
Each change can have different distributional impacts, it is true, but the potential to increase growth is well established in the literature. the thick is [criar] a value-added tax, which is non-cumulative and does not tax exports and investment. It makes a huge difference.

Mr. cited the importance of the fiscal agenda. Is it very difficult to get the revenue to close the 2024 Budget?
We have the proper revenue measures. given the text [do arcabouço] that left the Senate, we are quite sure and calm that it will be possible to deliver a Budget with the design of the new fiscal regime and the goal of zeroing the primary deficit next year.

What will be the measures?
It will be announced when Planning announces [o Orçamento].

O Minister spoke of sending together the Income Tax project. Do you count on these revenues to close the accounts?
Elements that will be incorporated into the Income Tax proposal should help in the fiscal recovery process and close the Budget.

Like taxation of dividends?
I will not anticipate. It is a discussion that will be announced.

Mr. Do you guarantee that next year there will be zero deficit?
I guarantee that the PLOA [projeto de Lei Orçamentária Anual] will come with the necessary measures to have zero deficit. The execution of this is always subject to… Suddenly there is a recession, everything changes.

Economists say the targets are too ambitious. Is messing with the goal out of the question?
Our goals are ambitious. One of the things that allows us to do this is the new tax regime, which decriminalizes tax policy. if it was a crime [descumprir a meta]it is much more difficult to be ambitious.

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X-RAY – GUILHERME MELLO, 40

Graduated in Social Sciences from USP and in Economic Sciences from PUC-SP, he has a master’s degree in Political Economy and a PhD in Economic Science. He was coordinator of the Graduate Program in Economic Development at Unicamp’s Institute of Economics and is a professor at the institute. He participated in the economic core of Lula’s campaign in 2022 and, since January 2023, he has been Secretary of Economic Policy at the Ministry of Finance.