High interest rates inhibit government projects, and BC cannot be limited to technical criteria, says Senate president – 05/22/2023 – Folha Seminars

After being incisive in defending the autonomy of the Central Bank, the president of the Senate, Rodrigo Pacheco (PSD-MG), criticized the current level of the basic interest rate, the Selic.

The senator stated that a rate of 13.75% per year is inhibiting the economic growth proposed by the government of Luiz Inácio Lula da Silva (PT).

This statement was made this Monday (22nd), during a seminar on the two years of autonomy of the Central Bank, promoted by Folha and sponsored by Febraban (Brazilian Federation of Banks).

The event can be seen in full at this link and on the newspaper’s YouTube channel.

Pacheco appealed to the nation as a whole to find a way to reduce interest rates and defended that this cut be gradual, “without sudden movements”.

The parliamentarian also reacted to a previous speech by the president of the Central Bank, Roberto Campos Neto, at the seminar of the Sheet. According to Campos Neto, for it to be possible to promote economic growth without high inflation and, thus, to have a lower neutral real interest rate, it is necessary to carry out structural reforms.

Real neutral interest rate is that rate that controls inflation, but without inhibiting economic growth.

Pacheco said that Congress has already carried out numerous reforms and approved regulatory frameworks in recent years and that it is not possible to wait for more reforms to reduce the basic interest rate.

During the debate, Leda Paulani, professor at the Department of Economics at USP, said she was against the autonomy of the Central Bank. She said that the rule currently hinders the action of a democratically elected government. “That’s what we live in Brazil today.”

Paulani stated that the institution is not in fact independent and also does not act in a technical way in the execution of monetary policy. The professor said that the BC can be independent of the government, but not of the financial system “which has enslaved Brazil for four decades”.

The professor evaluates that the BC’s autonomy makes the autarchy a kind of fourth power in Brazil.

The president of the Senate, on the other hand, defended the decision of the 2021 Congress that granted autonomy, and said that there will be no setbacks in relation to this issue. For him, “if the decision was right or not, only time will tell”.

Pacheco, then, defended that institutions that have more technical and career employees in their staff, such as the Central Bank and regulatory agencies, should act autonomously, without political interference.

According to the parliamentarian, this autonomy brings credibility to the country and ensures a business environment.

Pacheco praised the federal government for not attacking the privatization of Eletrobras through decrees, despite the constant criticism made to the privatization rules. For him, the government has the right to sue the courts to try to increase its participation in the company’s decisions.

One of the rules protecting the privatization of Eletrobras limits the right to vote in the company. Although the government owns 43% of the company’s shares, voting rights are limited to 10%.

During his participation in the seminar of the SheetPacheco said that there will be no setback in Congress’ decisions regarding the new sanitation framework or the privatization of Eletrobras.

BC of Dilma

Paulani stated that he would not be convinced to say that the interference of President Dilma Roussef (2011-2016) in the BC during her government, to lower interest rates at a time when inflation was high, was the factor responsible for the economic crisis. of the past decade.

At the time, according to the professor, the president adopted a business agenda, which she later abandoned.

He also cited changes in the international scenario and the reversal of the government’s economic policy from 2015 as factors that also weakened the Brazilian economy.

“This ‘went wrong’ has a series of variables that need to be considered. I wouldn’t be so convinced to say that the BC did what the government wanted, but it went wrong”, said the professor.