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Social Security Has Become a ‘Fiscal Black Hole’ and Economy is in the ‘Rock Bottom’, Says Minister

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Minister of Economy spoke in a congressional committee. According to him, it is up to parliamentarians to approve reforms proposed by the government and remove the country from the current economic situation.

Economy Minister Paulo Guedes said Tuesday in a public hearing at the Joint Budget Commission that Social Security has become a “fiscal black hole that threatens to swallow Brazil.” Guedes also said that the country’s economy is in the “bottom of the pit”, but should leave this situation with the approval of reforms, such as Social Security and tax.

He recalled that government accounts have been showing negative primary results, ie expenses higher than revenues (excluding interest on public debt) since 2014, and that the economic area estimate is that the result will remain red until the end of the Bolsonaro government.

According to the minister, the main responsible for the negative results of the public accounts is Social Security, which has presented billionaires in recent years.

“The Social Security hole has become a black fiscal hole that threatens to swallow Brazil,” Guedes said.

He recalled that the government asked the Legislature for a “supplementary credit” of R $ 248 billion this year.

Supplementary credit, according to Guedes, aims to avoid the non-compliance with the so-called “golden rule”, which prevents the government from incurring debt to cover current expenses, such as salary payments.

“We are asking for additional credit not to break the ‘golden rule.'” The golden rule is a basic precept, which is to avoid the irresponsibility of getting into debt to pay current spending. we need a supplementary credit to be able to pay current expenses, “he added.

The law admits that the government is only indebted to make investments, which can then be reflected in economic growth and increased collection.

Guedes said that the public accounts’ gap has boosted public sector gross debt, which currently stands at about 80% of Gross Domestic Product (GDP), well above the average for emerging countries.

‘Rock bottom’
Guedes also said that the country’s economy is at the bottom of the pit. According to him, it is in the hands of Congress to take Brazil out of this situation, with the approval of reforms proposed by the government.

“Regardless of the market wanting things to happen quickly, our reality is that we are at the bottom of the pit. So, it’s no use thinking that we’re going to grow on the outside, that we’re going to grow by 3%. It is not our reality. Our reality is this: we are at the bottom. Now it is in the hands of the House [National Congress] to take us from the bottom of the well, with this fiscal equation, “said the minister.

Earlier, the Central Bank, through the minutes of the last meeting of the Monetary Policy Committee (Copom), assessed that GDP may decline in the first quarter of this year. Guedes said that once the reforms are approved, the economy’s response will be swift.

“People say, ‘The economy is not responding quickly.’ I ask, ‘Answering what?’ If it is to respond, it is to respond to something. What did we do for her to grow up? We approve nothing. We did not do anything, how will she grow up? Only at the base of the saliva, the expectation, the dream? No, “the minister argued.

According to Guedes, the strategy of growing on the basis of declarations of economic authorities has already been tried in past governments. In the minister’s view, “it works for a certain time, and there in the front everything collapses.”

“We are not going to do it, we are not going to sell false hopes, we are saying, ‘The situation is serious, but reforms have the power to produce the answer,’ he said.