Even with the right economic policies it will take the winner of October’s presidential election time to put Brazil back on track, Persio Arida, economic adviser to one of the market-favorite candidates, said in an interview.
Gaping budget deficits that require sweeping reforms to spending and taxation alike will take at least two years, said Arida, who advises former Sao Paulo Governor Geraldo Alckmin in his bid for the country’s top job. A bill to cut pension benefits must be approved by Congress and will take time to have an impact on public accounts, he said.
Arida’s view contrasts with that of Paulo Guedes, top economic adviser for the leading candidate, far-right former Army captain Jair Bolsonaro. Guedes says the primary fiscal deficit can be reduced to zero in one year.
Arida says Brazil’s economic situation isn’t comparable to that of 2002, when financial markets boomed when fears that then front-runner Luiz Inacio Lula da Silva would abandon sound economic policy proved unfounded after his election.
“The challenge is much bigger today,” Arida told Bloomberg News in a phone interview. “The economy is not in good shape.”
Persio Arida, 66, holds a Ph.D in economics from the Massachusetts Institute of Technology, was briefly president of Brazil’s central bank in the 1990s, and helped craft the Real Plan that slayed hyperinflation. As a member of a far-left guerrilla group in the 1970s, he was arrested and tortured under the military dictatorship.
Not only does the Brazilian state spend poorly but it also taxes inefficiently, he added, focusing not on income or added-value taxes as text books suggest but on a series of unwieldy levies that stifle productivity.
With single-digit support in opinion polls, Alckmin significantly trails Bolsonaro and the leftist candidate Fernando Haddad, who has replaced Lula as the Workers’ Party candidate.
Source: Bloomberg