Brazil Infrastructure Boss Pledges Post-Pandemic Austerity
Brazil Infrastructure Boss Commits to Austerity in Post-Pandemic
(Bloomberg) -- Brazil will carry out public investment needed in the post-pandemic world without jeopardizing the government’s commitment to fiscal discipline, according to the country’s infrastructure minister.
Tarcisio de Freitas, one of the most influential voices in President Jair Bolsonaro’s cabinet, sought to dispel market concern about the future of a key spending cap law amid persistent budget pressures in the aftermath of the coronavirus. The rule, passed in 2016 and considered by investors as Brazil’s last line of defense against runaway budget deficits, freezes government expenditures for two decades -- reducing the room for investment as mandatory expenses keep growing.
“The government is committed to the ceiling, with the line of work determined by Guedes and his team,” Freitas said in a interview, in a show of support for Economy Ministry Paulo Guedes’ fiscal austerity plans.
Defense of the spending cap law by Freitas and also by Lower House Speaker Rodrigo Maia provided a temporary boost to the real earlier on Monday, with traders citing the remarks as a sign that policy makers are uniting behing the rule.
Brazil, one the global hotspots for the coronavirus, has already spent over 500 billion reais ($92 billion) to offset the impacts of the pandemic. The extra spending will cause its debt to balloon to an estimated 98% of GDP by the end of the year, according to the Economy Ministry. Guedes has promised to drastically reduce spending next year to put the country’s finances back on track. But pressure for more money keeps coming from lawmakers who support Bolsonaro in Congress, as well as some cabinet members who want to expand public investment to ease the economic blow of the disease.
In an interview with O Globo newspaper on Friday, Regional Development Minister Rogerio Marinho said he disagrees with Guedes and called for more public investment in infrastructure this year.
Freitas, instead, said that private investors will carry out most of the country’s infrastructure plans, with the government stepping in only in areas that require some support to become attractive, such as roads in the Northern states of Para and Maranhao.
It won’t be an easy task. The minister, a trained engineer and a member of the military, estimates the government needs to invest at least 9 billion reais in infrastructure next year. Because of the spending cap, his ministry only has 6.3 billion reais available. The solution, he says, is to convince lawmakers to support some of those plans with funds earmarked for their own projects.
“Several caucuses in Congress are already making commitments to relocate money,” he said. “We’re confident lawmakers will help with public investments.”
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