High interest rate harms investments in science and technology – 03/31/2023 – Sou Ciência

High interest rate harms investments in science and technology – 03/31/2023 – Sou Ciência


The level of interest rates in Brazil, in real terms, the highest in the world, led a Nobel laureate in economics, Joseph Stiglitz, to consider it “shocking” and capable of “killing the Brazilian economy”. Our point here is to point out that high interest rates also undermine the country’s ability to produce endogenous and sovereign development, invest in science, technology and innovation. The rentier desire in Brazil is leading us to a condition of neocolony exporting primary goods, dependent on external technology, and scrapping the public and private capacity to produce knowledge with autonomy, competitiveness and the possibility of meeting the needs of the population.

There are those who understand that the president of the Central Bank, appointed by Bolsonaro and linked to the financial sector, is deliberately acting to produce a recession and a drop in the popularity of the new president. This can be a conjunctural factor, undoubtedly relevant. But Campos Neto is above all serving the interests of banking, as shown by the astonishing opinion poll by Quaest among financiers. The issue is structural, Brazil has been hostage to public debt rentiers for decades. Acting tirelessly so that their class interests are seen as the general interests of society, they have a good part of the hegemonic media and parliament working in their favor.

Both Stiglitz and the “father of Real”, André Lara Resende, have already pointed out that high interest rates do not combat current inflation, since its causes are not excessive consumption, but mainly external (effects of the pandemic and the War in Ukraine). In addition, Brazil maintains the fiscal balance imposed by the draconian Expenditure Ceiling. Even with the tricks carried out in the Bolsonaro government and now with the transition PEC, the government has been running a surplus. If there is a tendency towards an imbalance in public accounts, it is produced by the increase in interest and debt charges, which squeezes the rest of the public budget, health, education, investments, etc.

Brazil currently maintains the highest real interest rate on the planet and no other country disburses as much as ours to amortize its public debt. In addition to the very high basic rate, the spread in Brazil is higher than in other countries, given the banking concentration, making credit at the end even more expensive. It is a mechanism for sucking up socially produced wealth, collected in taxes and transferred to a few bankers and investors, in a process of gigantic income concentration. In 2022, 46.3% of the federal budget was consumed with debt payments.

The Brazilian economy is being completely twisted and deformed in its purposes. Social priorities were placed upside down: paying the investor comes before guaranteeing basic social rights for the majority of the population. The collateral and perverse effects are many, including a strong impact on the country’s ability to generate development with sovereignty, that is, growth supported by national science, technology and innovation.

Around the world, states are investing heavily in economic recovery and social policies given the dual impact of the pandemic. There is also a race for competitiveness and pioneering in artificial intelligence, robotics, biotechnologies, renewable energy, new drugs and vaccines, experience economy, etc. Here, our hands are tied by an elite that has stopped being industrial to live on rent, luxury consumption and in earth and tax havens.

If debt payments grow and there is less budget left for all public policies, this means flattened levels and permanent cuts in science, research, higher education (which we have already presented here on the blog and in our funding panel) – that is, loss of public and sovereign capacity to develop technology and innovation in the most diverse strategic areas for the country and for the well-being of the population.

On the other hand, companies from all sectors, especially national companies, medium and small, and cooperatives, with access to more expensive credit, fail to invest in research and development, innovation, design, sustainable product life cycle and processes, to restrict themselves to what they already do and to even greater levels of precarious work, scrapping of machinery and outdated technology. With high interest financing, the entrepreneur minimizes risks by cutting what is not essential, that is, cutting medium and long-term strategic investment. It retreats to a conservative, short-term and passive position in the production process, following what is done by innovation agents, increasingly concentrated in the countries of the Global North and China.

Brazil, country of the future? Which future? Agricultural power that does not feed its population, does not produce fertilizers and necessary inputs and adopts predatory monocultures? Environmental power that does not know how to extract riches from its biomes without predation, with sustainable projects? Water power, whose waters do not meet the demands of society and are being privatized? Cultural power, with museums and heritage falling apart, ancestral knowledge and native populations under attack, and the film industry collapsing? Oil power, with Brazilian technologies increasingly outdated and exploration, refining and distribution being handed over to foreign companies? Energy power, which does not advance in the production of renewable energy due to lack of research, incentives and funding? Pharmaceutical power, which does not produce its own inputs and raw materials (depending almost entirely on imports) and which does not use our biodiversity and ethnobotanical knowledge? There is a lot to do.

Without science and technology, we will not be able to understand our problems, recognize our potential, strengthen areas where we are still relatively competitive, open new sociotechnical, scientific and solidarity perspectives for emancipatory economies, reinvent the post-Bolsonaro country, in times of pandemics. And if we continue like this, we will not be able to meet the most vital demands of our population, which will continue to be subjected to poverty, hunger, unemployment and helplessness.

High interest rates, rent, science and sovereignty do not mix. Either we reduce the income of debt holders and the earnings of financial banking, or we will continue to exist as a neocolonial farm, in deindustrialization, precarious work and increasingly dependent and unequal. Enough must come from the broadest sectors, not just from the voices of a few.



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