What Brazil takes away from the Davos Forum

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President Lula did not attend one of the most important events in the world economy, because he was busy preparing his trip to Argentina to attend the meeting of the Community of Latin American and Caribbean States

What Brazil takes away from the Davos Forum


Maria ZuppelloFrom São Paulo, Brazil.

What Brazil takes from the Davos Forum

Brazil's Economy Minister Fernando Haddad

An international showcase to sell an idea from Brazil that can attract capital. For the new government of Luiz Inácio Lula da Silva, this was the Davos Economic Forum, which brings together the world's powerful every year to discuss the economy. But the president did not come because he was busy preparing his trip to Argentina to attend the meeting of the Community of Latin American and Caribbean States (CELAC) on January 24 in Buenos Aires. In his place he sent his Minister of Economy, Fernando Haddad , and the Minister of the Environment, Marina Silva.

Davos was also the occasion to make economic appeals. Silva called for the 2015 commitment signed in the Paris Agreement to be fulfilledwhich provides for a fund of 100,000 million reais (close to 20,000 million dollars) for poor countries to fight against “climate change”. It was supposed to be financed from 2020, but it did not happen. “We have good global regulation but there is a lack of investment”, said the minister, who added that “we need an injection of funds for mitigation and adaptation actions”. The environment minister also declared that she has started negotiations to receive donations from the foundations of the Hollywood star Leonardo DiCaprio and the founder of Amazon, Jeff Bezos . She also met tycoon George Soros's son, Alexander, who now heads the Open Society Foundation.and which declared: “the development of the Amazon rainforest will benefit those who live there and is crucial for the future of our planet”. In 2021 alone, the Open Society transferred more than 107 million reais, about 20 million dollars, to Brazilian NGOs such as the Climate and Society Institute.

There was no shortage of blunders. Marina Silva stated that 120 million Brazilians, that is, more than half the population, suffer from hunger. However, a study of the Brazilian Network for Research on Food Sovereignty and Security contradicts it. It is said that there are 33 million people in serious food crisis. While a report by the World Bank last November stated that the number of people below the poverty line in the country has fallen from 5.4% in 2019 to 1.9% in 2020 , that is, from 11.37 million to 4.14 million.

In addition to Marina Silva, Economy Minister Fernando Haddad also spoke in Davos, presenting Brazil's new economic agenda to the world, promising to reduce the public account deficit to zero in two years and launch a tax reform in the second semester of 2023. In the first weeks of the new government, only the middle class suffered, which until now was denied the increase in the minimum wage to 1,320 reais, that is, 250 dollars, and the tax exemption for salaries of less than 5,000 reais, that is, 968 dollars, benefits that had been promised in the electoral campaign. The first package of measures presented by Haddad before leaving for Davos had also stumped the market. Despite having a potential impact of 242.7 billion reais ($47 billion) on the budget, these measures are essentially focused on tax increases, with no counterweight from tax reform for now.

What that Brazil takes away from the Davos Forum

Brazil's Environment Minister Marina Silva

Criticism was not lacking in Davos. Renowned political scientist Ian Bremmer, director of the Eurasia Center for Analysis, wrote a letter to his clients in which he stated that he did not have “much confidence in Brazil.” Bremmer also said that he foresees a “deterioration” of the economy and the popularity of the government, which will not be able to maintain its position of condemnation of the acts of January 8 “in the midst of the deterioration of the economy.” The letter was released after Bremmer's own meeting with Haddad, but Eurasia later rectified that the text had been written before the meeting.

Precisely because of international fears of a growth of inflation due to fiscal expansion that currently has no counterweight, as both Lula and Haddad have spoken out against the spending ceiling, the International Monetary Fund (IMF) has been made available to contribute to the debate on the new tax system that the Brazilian government wants to implement. The IMF is willing to offer Brazil a technical team to show the rules implemented in other countries and their opinion “on what works and what doesn't.” The Inter-American Development Bank (IDB) has also declared its willingness to contribute to this vital debate for the future of the country.

It was in Davos where Haddad promised to present to Congress before April the new fiscal anchor proposal to replace the spending ceiling, which is one of the three fiscal rules that the government must abide by. At the end of December, a new text of the Constitutional Amendment Proposal (PEC) was approved in the Chamber of Deputies to extend for one year the spending ceiling of 169.1 billion reais, about 33 billion dollars.

Brazil's accession to the Organization for Economic Cooperation and Development(OECD) was also discussed in Davos. Haddad met with Secretary General Mathias Cormann for fifteen minutes and affirmed that the final decision will correspond to Lula. “There is no obstacle for Brazil to formulate an accession according to its interests. There is no all-or-nothing rigidity. There is room for debate, ”he said, also announcing the creation of a working group on the subject.

So far Lula has not shown any interest in a possible admission of Brazil to the OECD. In the first days of his tenure, he even closed the secretariat that followed the complicated process. However, Brazil has spent twenty years trying to enter this multilateral organization that, unlike the IMF, does not lend money, but, on the contrary, requires strict parameters from member countries, not only economic but also ethical. And he had almost done it. So far Brazil, whose accession began last year, had met more than half of the 208 required standards and was on the verge of reaching the next 45.

What Brazil takes from Davos Forum

The President of Brazil, Luiz Inácio Lula da Silva

According to the Institute for Applied Economic Research (IPEA), the admission could represent an increase of 0.4% of the Product Annual Gross Interior (GDP), since mere adherence would be a kind of “quality seal” capable of attracting more foreign investment. But as of 2019, the Workers' Party (PT) opposes it because “adherence presupposes a rigorous review of national public policies and practices in areas such as agriculture, science and technology, trade and investment.” Perhaps the parameters required by the OECD in terms of fiscal rationalization and the fight against corruption are frightening.

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