‘Fiscal uncertainty hampers investment returns’, says economist


THE uncertainty environment around companies, especially in relation to how the large fiscal deficit of the country, inhibits the return of productive investment and the sustainable recovery of the economy, in the economist José Roberto Mendonça de Barros, partner of MB Associados. “As long as the investment doesn’t really come into play, it doesn’t have sustainability.” Below are the main excerpts from the interview.

Like mr. assess the recovery of the economy?

In June, a recovery began that is visible in some segments. For example, in housewares, electronics, furniture, cement. This is due to the nature of these products, associated with the volume of money that the “coronavoucher” placed in the system. We reached 60 million people receiving at least R $ 600. It is a mountain of money. If we look at it from the point of view of the production sectors, the recovery is more noticeable in the industry, so much so that there is difficulty in delivering some products. The recovery continued in July, August and until now. Depending on where you look, it gives a certain enthusiasm. However, the service sector, which accounts for most of the GDP, is going more slowly. Therefore, it is not a recovery in V. It is a slow and very uneven recovery between sectors, size of companies and type of companies.

What was the role of emergency aid in the resumption and how is it going forward?

Nobody disagrees that the main driver of this movement was emergency aid. What will happen in the last four months is that we will have a tooth. This group of about 60 million people, which is a lot of people – we never had anything like it – and which received until August R $ 40 billion per month, will receive R $ 20 billion per month. In addition to the smaller aid, with food inflation in the double digits there will be less resources for other expenses. In parallel, many people are leaving the market. We see this in the small business, in the store, in the provision of services.

Will there be a reflection on unemployment?

The unemployment effect is not yet over. As activity resumes, more people will look for jobs. Therefore, the unemployment rate tends to increase.

Is there a prospect of sustainable recovery?

As long as the investment doesn’t really come into play, it has no sustainability. Especially because there is no privatization, little concession, there is enormous uncertainty on the part of companies. It is curious, because we are hearing about the lack of certain products, but this does not necessarily guarantee that there will be an investment. Demand starts to improve and the company has to make a difficult decision, for example, to extend the production shift, which costs money. The question that all companies are having is whether the demand will continue to justify the extension of the shift and its maintenance.

What would you need to do to turn that key?

I think what is really frightening is what is happening in the macro part. The pandemic led to the expansion of fiscal policy, which 100% of Brazilian analysts supported. The “coronavoucher” was a correct move. However, it increased the public deficit, from R $ 100 billion, to R $ 900 billion. The big question is what will happen with the tax issue. The crash between the economy (Ministry) and the Plateau, with an intense desire to move towards a populist policy of expanding spending, obviously only accentuates the doubts that the markets have. At the same time, reforms, which were already difficult, appear to be becoming even more difficult. This generates uncertainty, the first result of which is to have no investment.

If there can be federal confusion, there will be no investment. Another reflection of the uncertainty is that the long interest rate does not fall. The short is at 2% per year. But the long rate is between 7% and 8%, which is high, with inflation of 2%. This is because there are doubts about what will happen to the public debt. And the dollar is up there, above R $ 5. Any confusion in the political scenario, if there is doubt about the economic part, the first victim is the long interest rate and the other is the devaluation of the real. Hence, there is this uncertainty, which reinforces caution on the part of everyone, who insures the investment.


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