New Confaz coordinator defends pro-reform agenda

By ETCO

Source: DCI, 22/06/2009

SÃO PAULO - The National Council for Farm Policy (Confaz) has, since last month, a new coordinator. The Secretary of Finance of the State of Bahia, Carlos Martins, was chosen for the position and takes over at an important moment, when state governments try to minimize the impact of the international financial crisis on their cashiers and demand measures from the federal government. "The most important thing today is to act together in relation to the crisis, which affects everyone," he said in an exclusive interview with DCI. Martins established priorities for his management, including promoting the approximation of state farms with Congress and demanding that the Executive participate more in decisions that affect the government's Treasury.

When it comes to the resurrected tax reform, Martins says that Confaz wants to build a proactive agenda on the topic, as they understand that, while it is not carried out, there is a loss for state governments. "There is still room to claim, and we are interested in this issue being discussed in Congress," he said.

The Confaz coordinator complains that despite the countercyclical measures taken by the federal government having been well received by the states, the actions were announced without any prior communication with the farms in order to prepare for a new scenario. "An example of this is the reduction in the IPI [Tax on Industrialized Products]", he said. "We need to be warned before we can adapt, we claim that in case of changes with impacts on the states, we are warned not to be caught by surprise," he added.

The economic turbulence affected the performance of the Tax on Circulation of Goods and Services (ICMS) in the first quarter of the year, as well as triggered a drop in transfers from the State Participation Fund (FPE). To deal with the revenue problem, the emergency financial program was negotiated via the National Bank for Economic and Social Development (BNDES), in the volume of R $ 4 billion to be made available to the states. Martins, however, says that bureaucracy is an obstacle to the release of this resource. Another request from the states to mitigate the crisis is the fulfillment of the federal transfer of R $ 1,2 billion referring to the Kandir Law, due to excess collection. "There are promises that only this year's referral will be passed on, which is something around R $ 1,9 billion," he said.

Martins also intends for the Council to act closer to the National Congress, where, according to him, bills of law and constitutional amendments circulate that directly concern state farms. Among them, Martins cites PEC dos Precatórios (nº 12-2006), “We need to defend the position of the states”, he argued. "I think there is a need, we are integrated into the agenda of the Chamber and the Senate," he said.

Confaz is also expected to continue the debate on changing the index of the states' debts with the Union. A flag launched last year by the State of Mato Grosso, Martins explains that the proposal is not an amendment to the Fiscal Responsibility Law (LRF). "With the fall of the Selic rate, we are paying the Union higher amounts and this represents a painful disbursement", he said. The inflation index of the public debt of the states is currently the IGP-DI (General Price Index - Internal Availability) and the suggestion is that it will be corrected by the IPCA (National Consumer Price Index).

The example of the impact that the change would bring is Mato Grosso itself: from 1998 to 2008, if the inflation correction had been the IPCA, the State would have disbursed R $ 773 million less than everything that was paid.

Bahia


At home, in his own state, Carlos Martins is dealing with the retraction of tax revenues. “We were one of the most affected. Much because of the drop in oil prices and the stoppage of the petrochemical complex. In the first four months of the year, we lost approximately R $ 224 million [in ICMS]. And in transfers, this volume is around R $ 200 million ”, he said.

Aid actions are already underway. Efforts such as the development agency (Desenbahia), the credit line for working capital directed at micro and small companies and also for the export sector, in addition to ICMS installments, up to four times and reduction of the IT tax rate. The government also contracted operations with the BNDES and the Inter-American Development Bank (IDB). Under the BNDES emergency program, the government of Bahia is entitled to R $ 375 million.

To closely monitor its effects, Sefaz created a Committee that works with three scenarios for 2009, one pessimistic, another intermediary and an optimist. In these scenarios, the variables are GDP, exchange rate, inflation, commodity prices and interest.