Fernando Honorato, an economist at Bradesco, defends an increase in tax collection in the country

Fernando Honorato is an economist and current Chief Economist at Banco Bradesco. He worked in other major national financial institutions, always in the position of economist, member of boards and boards of important economic centers in the country, with a degree and a master’s degree in Economics from the Faculty of Economics, Administration and Accounting of the University of São Paulo – FEA-USP, Program for Management Development (PMD) by IESE – University of Navarra, São Paulo, SP.

Roberto Dardis – How do you see our economy today with interest rates of 13.75%? Is blaming only the BC for these interest rates right?

Fernando Honorato – The high interest rate is the result of a series of factors: supply shocks from the pandemic (semiconductors, automobiles, war), demand stimulus programs, labor market resilience and discouragement of inflation expectations. It is worth mentioning that these are global phenomena and not just Brazilian ones.

The new fiscal framework should limit the expansion of public spending and commodities and the dollar are falling, which helps inflation. Thus, after defining what will be done with the inflation target, in June, expectations should reduce their distance in relation to the target, allowing the beginning of the interest rate cut in September, taking the Selic to 12.25% at the end of the year.

The economy is resilient despite this scenario of high interest rates, a result of good agricultural performance and, also, the legacies of the reopening of the pandemic. But the joint construction effort by the government and the Central Bank to cut interest rates is essential to reduce the risks of a more intense slowdown ahead.

RD – With a high public debt and the government not saving, is a tax increase imminent? Or do we have other ways out? With low growth, inflation still outside the target and high interest rates, and without a viable economic project (fiscal framework/tax reform), what would be the way out for the government to return to a surplus in its accounts?

FH – The new fiscal framework provides for expansion of public spending between 0.6% and 2.5% in the coming years. According to our simulations, this should stabilize federal government spending at around 19% of GDP. As Federal revenue currently runs around 17.5% of GDP, the country will have to rely on an increase in revenue of around R$150 billion in the coming years to zero out the primary deficit and start a stabilization process. and falling public debt.

If the intention is to maintain this level of spending in the coming years, the only alternatives for stabilizing the public debt without increasing inflation are raising revenue or faster economic growth, which depends on reforms that increase productivity and GDP. country’s potential. Tax reform, by giving some rationality to consumption taxes, is a candidate for accelerating economic growth.

RD –From zero to 10, what grade would you give on political meddling in our economy? And what weight does this intrusion cause in the country?

FH – Brazil has had advances and setbacks in its regulatory frameworks that organize and supervise the relationship between the public and private sectors. In recent years, important reforms have taken place, such as the labor and sanitation law, which have improved the country’s legal framework, the autonomy of the Central Bank, the positive registry, as well as reforms that have disciplined the relationship between public banks and the Treasury. There is still a lot to be done to simplify bureaucracy in the country and, again, tax reform can be an important step in this direction.

RD – Even knowing that we need general reforms, many flee this hornet’s nest, but the country is falling behind without them. What’s our way out?

FH – The necessary reforms for accelerating growth are known: tax, legal security, reliability of regulatory agencies, greater international insertion, raising the productivity of the public sector, increasing the efficiency of spending and results in education, fostering competition and advances in infrastructure .