PT has to support Haddad – 02/09/2023 – Celso Rocha de Barros

Brazil is growing faster than we expected. In the second quarter of 2023, the economy grew by 0.9%, three times more than the market expected.

With the return of Paulo Guedes to the private sector, it was predictable that the average quality of Faria Lima forecasts would drop. Even so, the difference was huge.

The good results give strength to Fernando Haddad, who will face a series of difficult fights in the coming months.

The usual gang will keep trying to make Tax Reform worse. Remember: from now on, whenever you hear “Congress changes Lula’s Tax Reform so that X doesn’t have to pay taxes”, it’s almost certain that X won’t be you.

Most likely, you are the Y who will have to pay X’s share to close the government account.

Which, by the way, is already true in the case of exclusive funds. Haddad defends that these investment funds, which are only available to those who have many millions to invest, pay the same tax that you pay when you invest your money in the bank.

You have every right not to believe me, but I swear it’s true: under current law, this group that could buy your house a hundred, 300 times over, pays less tax than you. It looks bad before you remember that over the years the government has continued to raise a lot of money. Who paid the share that the very rich did not pay?

So it is.

Also, Haddad faces friendly fire. The finance minister defends the maintenance of the target of zeroing the primary deficit next year. According to the news, other ministers find the goal too ambitious, and defend accepting a deficit of 0.5%.

Zeroing the deficit would help the Brazilian economy a lot. But it depends on a series of additional congressional victories. All of these wins are possible, most of them are likely, but no one can be sure that everything will turn out exactly as Haddad expects.

Skeptics are therefore not crazy. Still, Haddad is right.

If the zero deficit target is abandoned, the pressure for Congress to approve measures to increase revenue will be lessened. Investors’ expectations, which perhaps help to explain the current good results, may worsen. At the very least, if the target is abandoned too lightly, by the way, without making it clear that the government tried in every way to win the disputes in Congress, the credibility of the economic policy could be undermined.

Furthermore, one must be careful about attributing Haddad’s criticisms to “leftism”. PT members who give up too quickly on the zero deficit target will have to admit that they struggled when it came to fighting to collect taxes from the rich and correct other highly regressive distortions of Brazilian public spending.

I also remember that in 2016 the PT did not support the pension reform proposed by Dilma Rousseff, weakening it even more, for fear of doing badly in the mayoral election. There was no reform, but the PT did badly all the same and Temer was president on election day.

If the goal has to be changed at the end of the year, there is a way. But the PT has to back Haddad as much as it can: he already has enough opponents on the right and is delivering results three times better than expectations.

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