Robust Brazil walks on safe side to avoid being sucked into global slump
Rousseff angers unions by putting spending caps and raising primary surplus
Brazilian President Dilma Rousseff insists that her country is not in immediate danger of being severely affected by the global crisis. But she is pragmatic and, without trying to be alarmist, wants to play on the safe side in case the crisis may, in some way, affect the country that has been driven forward by one of the region's fastest-growing economies over the past eight years.
Rousseff wants to use excess revenue to raise the primary surplus from three percent to 3.5 percent of GDP to give reassurance to the international markets. At the same time, she has pledged to cut public spending, without affecting social programs. The primary surplus, which the government uses as a reference point when it drafts fiscal policy, is the difference between revenues and the government's entire expenditures, including those by state and regional and municipal governments, regardless of the money spent to make interest payments on the public debt.
Among Rousseff's proposals is a measure to adjust public spending by as much as 15 billion reales (or 6.5 billion euros) while at the same time she opposes any plans by Brazilian lawmakers in Congress to pass bills to increase spending. Her cautious moves have caused discontent among the unions, whose leaders on Monday met with her and Finance Minister Guido Mantega.
The president of Força Sindical, Congressman Paulo Pereira da Silva, who was present at the meeting, acknowledged that the president's actions "do not have the blessing of the unions." Recognizing that increasing the primary surplus is one way to address the crisis, Pereira da Silva said that this should be accompanied by a drastic and immediate reduction of the official interest rate, which stands currently at 12.5 percent- one of the highest in the world.
"Every time you increase the primary surplus, unions interpret this as an economy being run by international bankers," he said.
According to the president of the General Confederation of Workers of Brazil (CGTB), who was also present at the meeting, Rousseff argued against all the unions' claims and denied that she was introducing a "policy of recession" as they accuse her of doing. Instead she called it "a new way of tackling the crisis" because, she says, the tools needed in this crisis are different from those used in 2008.
Rousseff has asked the unions to "examine the economic situation before criticizing" the measures her government has taken.
Finance Minister Mantega told the press that Brazil is walking "in the opposite direction" to developed countries that have been affected by the crisis, and made assurances that Brazil's successful economic model "will not be touched" because, he said, it is the best protection the country has from the global crisis, which "could get worse."
Union leaders have threatened to hold a demonstration this week in front of Central Bank to demand lower interest rates. The latest official forecasts indicate that the country's growth this year will not reach four percent while tax rates- which analysts call among the highest in the world- have increased.
