José Luis Dacosta Oreiro – Professor of Economics at the University of Brasilia
Possible minister if Lula wins the elections, assures that the fight against inflation is at the root of the deindustrialization and inequalities suffered by the country
When you ask him about the latest polls he fidgets in his chair. The latest polls point to a slight reduction in the advantage that Lula da Silva has over Jair Bolsonaro ahead of the presidential elections in Brazil, which will have their second and final round next Sunday. The five point lead from the first round has become four in recent polls. “He is going to be at odds,” says this economist, a professor at the University of Brasilia, whose name sounds like a candidate for a ministry in the economic area in the Lula government. José Luis Dacosta Oreiro crosses the pond frequently to participate as a professor in a master’s degree at the University of the Basque Country, in the Sarriko Faculty of Economics. This week the tribunal of a doctoral thesis has participated in that faculty and has given the students a class, the result of the experience in their country, of full relevance: the risk that high interest rates to combat inflation put growth to sleep economic.
– Has the economic debate become the key element of the presidential campaign?
– If you had asked me a year ago I would have said yes, but not right now. Since shortly before the first round of elections, there are other issues that have gained prominence. Religious issues, accusations against Lula of wanting to close the churches, which is shocking because he is a practicing Catholic, the controversies over gender politics or even ‘fake news’ such as the fact that the left tries to teach children to have sex in schools . It is what the economist Paul Krugman defined as “weapons of mass distraction.” You take the economics out of the debate and take it somewhere else.
– It is curious, because it is a country with serious problems of economic development, inequality, poverty…
– Effectively. For a population of just over 211 million inhabitants, 33 million are in a situation of poverty and 100 million are not guaranteed that they can normally eat the three meals a day, breakfast, lunch and dinner. They are food insecure.
– Fortunately unemployment is not very high. It is around 9% and the rate is lower than the Spanish rate.
– Yes, but in Latin America the unemployment figures are misleading. There is a very large informal sector, which occupies 50% of the workforce.
– Informal sector?
– They are people who do not have an employment contract. In addition, 25% of the workforce are self-employed with a survival format.
– There are many voices that also warn about the risk of excessive public spending in the hands of Lula, which could provoke reluctance in the financial sector and with it the difficulty in financing the indebtedness.
– Actually, I think what happens is that when journalists seek an opinion on the economy, they resort a lot to bank economists…
Tax Reform
– Something that is recurrent in Spain has also appeared in the debate on these elections. The need for tax reform.
– In our case it is because we have a reform pending for twenty years. The industry pays a lot of taxes. 47% of indirect taxation is provided by the industry. Along with this, the Income Tax is absolutely regressive. The table has not been adjusted for inflation for ten years and liberal professionals can hide behind a commercial company, with a very low tax burden. Currently, those who pay the most in Brazil are public officials. I am and I pay approximately 50% of my income, compared to a general tax burden in Brazil of 33%. I know people who earn ten times more than me with a lower load.
– What is the legacy of the Bolsonaro government in your opinion?
– Bolsonaro has destroyed all public policies in our country. Control in the Amazon; public health in which compulsory vaccination against polio has even been abandoned; a 90% reduction in the science and technology budget. Everywhere you look, it’s a mess.
Opposition to lula
«There is a middle class that does not forgive having lost the privilege of hiring cheap»
The population
«33 million people live in poverty and 100 in food insecurity»
Taxes
“In Brazil, the one who pays the most taxes is the civil servant. We have a pending reform»
– Is inequality the main problem in the country?
– There are two united problems, social inequality and premature deindustrialization. In 1980 industrial production was equal to that of China, India and South Korea. We had the most developed industrial park in developing countries. And since then it has continued to decline. When you lose industry, you lose the sector that pays the highest salaries and that has left many people in subsistence. Selling things at traffic lights, begging. Now even in Brasili, which is our Versailles, there are people living on the streets.
– What is your formula to try to overcome this situation?
– Invest in training and support the reindustrialization of the country.
– And why has this deindustrialization occurred?
– It has been because of this trap of reducing inflation but in exchange for a very high short-term exchange rate, which in some years has reached 25% and an exchange rate with the currency highly overvalued, combined with trade liberalization. Any investor being able to earn 10% by lending money to the Government does not risk in a company.
loss of privileges
– I’ll go back to the beginning of the interview. The votes of the left and the right are more or less divided into two halves. What is the reason for a distribution of this type with more than half of the population in difficulty?
– There are many reasons. The first is the effect on the Workers’ Party, as a result of corruption. Lula has been acquitted and it has not been possible to prove that he had any part in it, but there was corruption. The second is the rise of the evangelical church, which conveys a curious message: you have to win God to become rich. That, in addition to relegating women to the background or not accepting homosexuality. Look, 10% of the Brazilian population believes that the earth is flat, I won’t tell you more. And there’s a third reason… but it’s pretty hard to tell.
– Come on, do it.
– Brazil was the last country in the world to abolish slavery and that has left a certain residue in society. Broad layers of the population that we can identify as middle class, professionals or employees with acceptable salaries, have always had internal domestic service. It is even common for all residential buildings to have a doorman, when you in Spain have automatic doormen. Well, in the previous Lula government there was a significant increase in the minimum wage and many of these families now can no longer have domestic service under the same conditions. It may seem curious, but that has generated a feeling in that part of the population towards Lula because they consider that he has taken something from them.
The son of a Galician at the gates of a ministry
He is the son of a Galician, born in Mazaricos, a town in La Coruña, who in 1954 emigrated to Brazil with a brother, while another emigrated to Germany. His mother is Portuguese and his parents met in Brazil, where he was born, to direct his steps in the academic path of economics when he was young.
– His name sounds like a candidate to occupy the post of economy minister in the event that Lula wins the elections.
– (Smiles) It may be but you never know. Actually a ministry in the economic area, because Lula’s idea is to re-separate what Bolsonaro united in the Ministry of Economy, in which he unified Finance, Planning, work and Development and Industry. I can already tell you that he will not be a finance minister because a politician is needed there, not a technocrat like me.
– A politician in the Treasury?
– Yes, in this case it is justified. Lula is going to meet with the most right-wing parliament in the history of Brazil. That is going to require a politician to negotiate fundamental issues, like the budget. And a technocrat in the midst of politicians endures little…
– Is it better to have one voice or several in a government discussing economic measures?
– Traditionally in Brazil, the Ministry of Finance has always been more orthodox and the planning ministry more developmental. Lula’s style is very peculiar because he loves contradiction in the debate of ideas. That is, when there is a measurement under study, he calls a person and listens. Then he calls another and listens to him. And so on until he has all the arguments for and against. And then he decides. He is a very smart guy.
– If one reviews the electoral program of Lula and the parties that support him in his attempt to return to the presidency, one might think that this is an exact copy of what Pedro Sánchez is doing in Spain. Help for families, tax increases, increased public spending, labor reform…
– It’s true. Right now in Brazil the easy accusation against Lula is to say that he is a communist.
– Well, radicalization leads to this kind of thing. In Spain anyone who verbalizes any criticism against the Government is accused of being a fascist.
– Well, as far as the Government of Brazil is concerned, I can assure you that it has never been further from falling into a communist temptation. Lula is Catholic and the vice president he has chosen to accompany him, Geraldo Alckmin, is from Opus Dei. I’m telling you, zero risk of a communist government.
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