Author: Marcílio Marques Moreira

Source: O Estado de S. Paulo, 03/04/2009

The ongoing financial tsunami sparked the most serious global recession since World War II. It arrived in Brazil in October 2 and, in addition to its gravity, has three characteristics - high complexity, wide uncertainty and strong volatility - that hinder the effort to interpret it and, even more, to predict its future trajectory.

 

In developing a strategy to overcome the crisis and prepare our economy for the redesigned world that will follow, it is essential, therefore, to correctly assess the factors that converged to generate it. Simplistic explanations and hasty conclusions are useless. They hinder rather than help the balanced appreciation of the elements at stake.

 

Both the State and the market had contributed to the unprecedented five-year period of global prosperity, from 2003 to 2007, and were unable to perceive and curb in time the series of abuses and high-risk initiatives that, arising in a moment of euphoria, ended up precipitating the crisis. . It issued the first alert in August 2007 and came to an almost systemic disruption in September 2008. Both the rhetoric of salvation by the omnipotent state and the self-correcting market cannot resist a more consistent analysis, which takes into account theoretical assumptions and the practical experience of the long history of financial crises.

 

It cannot be forgotten that they were legislative initiatives, ordering that the financing of housing for low-income groups should be privileged, even minimizing their ability to pay, combined with legislation that allows the tax reduction of interest on any real estate financing, which contributed to inflate the American housing bubble. Nor were they macroeconomic policy decisions, pushing basic interest rates in the United States to 1%, coupled with those of China, manipulating its exchange rate downwards, which led to the spurious symbiosis by which China started exporting products at cost falling for unruly American consumption, while financing it by the massive purchase of debt securities.

 

A powerful machine was created to transform the huge US current account deficits, which amounted to US $ 1 trillion a year, into international liquidity. The phenomenon was repeated in other emerging countries whose exports allowed the accumulation of surpluses, which started to finance the consumption of the central countries, flooding the world with cheap and abundant credit. Excessive savings in the periphery, excessive consumption in the center and an effective intermediary financial system, although imprudent, generated an unsustainable global imbalance, a fertile ground for excessive, greed and fraud, without regulation and supervision by the State, creating exorbitant risks, which, by burst, eroded confidence, the cornerstone of the economic system.

 

In Brazil, the government has sought to mitigate the situation that was most dramatically reflected in the fall in GDP in the last quarter of 2008. Unfortunately, the high level of fiscal commitments it had assumed in recurring personnel and costing expenses, coupled with the drop in tax collection inherent to the slowdown, came to restrict the scope of its fiscal action. In contrast to the majority of our peers, monetary policy therefore bears the main responsibility for leading the countercyclical effort, using the leeway it has been able to preserve. Reducing interest rates, releasing reserve requirements and managing liquidity levels, in reais and in currencies, will be precious weapons.

 

Fiscal policy will be responsible for maintaining support for the social protection network, especially Bolsa Família, and for making public investments essential, especially in infrastructure. The government will also have to improve the business environment, tempering its fiscal voracity and ensuring greater legal certainty for economic activity, reinforcing the regulatory framework and honoring the independent and reliable performance of regulatory agencies. Only then will we be able to attract private capital, national and foreign, for priority investments. It is an indispensable task, given the low level of our savings, just 16,9% of GDP in the fourth quarter of 2008.

 

The punctual manner that until now has presided over the allocation of countercyclical public resources, given, in fact, emergency situations in sectors that are more dependent on credit or exports, has to be revised to include it in a strategy aimed at preparing the country for the world of tomorrow, in which new paradigms of productivity, efficiency and eco-compatibility will prevail.

 

Anti-crisis policy, therefore, must be a vertebrate around a common thread and be inspired by a clear vision of the future. Subsidizing companies or financing them at differentiated interest rates, without qualitative counterparts and commitments to modernize management, distorts competition between them and subverts the equanimity and efficiency that should inspire the dynamic and healthy market demanded by the more competitive environment that will prevail tomorrow .

 

Therefore, there is an urgent need to put the market operation back on track, regulating it without stifling its dynamism and creativity, virtues proper to the freedom to undertake. In turn, the State must be rethought and its expenses redefined, so that it starts to prioritize education, technical-scientific knowledge and the physical and human infrastructure, values ​​that are little appreciated by us, but indispensable to the mobilization of the enormous potential wasted on the country's integral development. It is an unavoidable requirement in the post-crisis world, which is less exuberant, but still full of promising opportunities that we no longer have the right to ignore.

 

Marcílio Marques Moreira is president of the Advisory Council of the Brazilian Institute of Ethics in Competition. Site: www.etc.org.br