Author: Gustavo Patu

Source: Folha de S. Paulo, 07/04/2009

Organ attributes recent expansion to global bonanza and credits postponement of reforms to change in Finance command

OF THE BRASILIA SUCURSAL

Bird (World Bank) report states that Brazil ceased to give priority to economic reforms in the management of the Minister of Finance, Guido Mantega, during the period of peak global prosperity - and now, after the boom, it is unlikely to achieve growth again high in the absence of that agenda.

It is a reference to a group of measures and projects presented during the first term of President Luiz Inácio Lula da Silva, with the support of international financial organizations, to increase the potential for expansion of the country's economy.

The intention was, in what is conventionally called microeconomic reforms, to simplify taxes, reduce bureaucratic obstacles, face bottlenecks in infrastructure, increase competition in the banking sector and stimulate investments in technological innovation, among other goals to be achieved in stages.

In the World Bank's view, the agenda began to be relegated to the background with the replacement of Antonio Palocci Filho by Mantega in 2006.

“Several factors have reduced the government's commitment to the microeconomic reform program agreed with the bank. First, the departure of several key officials at the Ministry of Finance, including the minister. ”

It is not by chance that the Brazilian government's progress in carrying out the reforms, which deserved the adjective “satisfactory” until that year, was downgraded to “moderately satisfactory”. In the item “Improvement of the business environment”, the score drops to “moderately unsatisfactory” in the report.

Loans

Bird intended to make three loan operations to Brazil to help advance the agenda. The first, US $ 505 million, was fully complied with; of the second, only a quarter of the expected $ 600 million was released; the third was canceled in agreement with the government.

The second reason, says the document, was the long-awaited resumption of Brazilian economic growth, which "led to a loss of interest in some aspects of the agenda". The expansion rates of the Gross Domestic Product finally exceeded 5% in 2007 and 2008 - "more as a result of the high prices of primary export products than by the improvement in competitiveness", points out the Bird.

Both the good Brazilian performance was the result of the exceptional moment of global trade, it is argued, which was abruptly interrupted when the worsening of the financial crisis in the developed world paralyzed credit and reduced the demand for oil and agricultural products.

"It is unlikely that Brazil will be able to sustain high economic growth in the absence of further reforms to improve its competitiveness, particularly if external conditions remain unfavorable with lower demand for commodities and higher financial costs," he says. For this year, analysts consulted by the Central Bank estimate a decline of 0,19% in GDP.

Ideological matrix

One of the main ideological matrixes of liberal economic thought, the World Bank has had an increasing influence on the agenda of Brazil and Latin America since the past decade. Together with the IMF (International Monetary Fund), it helped to propagate measures such as privatization, containment of public spending, commercial and financial opening, in what was called the Washington Consensus.

This idea was effective in controlling inflation and regularizing payments on foreign debt, but not in accelerating growth. Then came the second generation of reforms, no longer focused on quantities such as public spending or the flow of capital, but for the improvement of laws and institutions - hence they are called microeconomic.

The agenda was adopted as the banner of Palocci's management, when, for example, the Bankruptcy Law and the regulation of Public-Private Partnerships were approved.