07/01/2024 – 21:44
The recent rise in the dollar is due to “a lot of noise,” Finance Minister Fernando Haddad said on Monday (1st). The minister acknowledged that the US currency rose more against the real than against emerging market currencies and advocated improving government communication to report economic results.
“I attribute [a alta do dólar] to many noises. I already said this in Conselhão [reunião do Conselho de Desenvolvimento Econômico Social Sustentável, na última quinta-feira (27)]needs to better communicate the economic results that the country is achieving,” Haddad said early in the evening, after the dollar closed at R$5.65 and reach the highest level in two and a half years.
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“[O dólar] is high. Despite the devaluation [de outras moedas] has happened all over the world, in general, here it happened more than in our peers: Colombia, Chile, Mexico”, declared the minister, who, however, did not inform what noises have caused the devaluation of the real.
According to Haddad, the dollar is likely to settle down in the coming weeks and even reverse part of its recent rise. “It will settle down, because when these processes unfold, this tends to reverse, in my opinion,” he declared. Regarding a possible intervention by the Central Bank in the exchange rate, advocated by several economists, the minister said that the decision is solely up to the monetary authority.
Haddad mentioned a piece of positive news for the economic team that, in his opinion, needs to be communicated well: the June tax collection results, which were reported to him today by the Federal Revenue Service. According to Haddad, the figures were once again above expectations, even with the impact of the floods in Rio Grande do Sul on public finances.
“We are in the sixth month of good news in economic activity and revenue collection. You will remember that it was a [estimativa de] collection that was placed at a very challenging level”, he stated. The Federal Revenue will only release the result of federal collection for the first half of the year at the end of this month.
Cost cutting
Part of the rise in the dollar is due to the financial market’s expectations regarding the announcement of spending cuts for the 2025 Budget and the contingency (blocking) of public funds for this year’s Budget. Haddad said he will meet with President Luiz Inácio Lula da Silva on Wednesday (3) to discuss these issues.
The 2025 Budget will only be sent to Congress on August 30. Regarding the possibility of the government announcing spending cuts early from next year, Haddad said that only President Lula can make the decision.
“The president has a commitment not to violate rights. And this commitment will be respected by the economic team. We fully understand his concerns and that is why we are not focusing on one item and are making a general diagnosis of the issues that need to be addressed,” justified Haddad.
According to the minister, the economic team has a good prognosis for the 2025 Budget and is confident that it will send Congress a project with balanced revenues and expenses.
Regarding the budget contingency for 2024, the volume of which will be announced on the 22nd, Haddad said that the government will block the amount necessary to comply with the fiscal framework, which foresees a zero primary deficit target, with a tolerance margin of R$28.8 billion, either way.
“We have a fiscal framework that must be complied with. So, it will be the size necessary for our goals to be achieved, both from the point of view of expenditure, which has a ceiling [de gastos]and from the revenue point of view, so that we come closer to the 2024 target range. This is our effort. Even considering these setbacks, I remain optimistic about the end of the semester”, declared the minister.
Tax reform
Haddad also reported that the economic team finalized the Safra Plan on Monday, which will be announced on Wednesday, and agreed on possible changes to the bill regulating the tax reform on consumption. On Monday, members of the Chamber’s working group on the reform met with the minister. They proposed including items such as salt and meat in the tax-exempt basic food basket, in exchange for a possible increase in taxation on gambling.
According to the minister, the extraordinary secretary for Tax Reform, Bernard Appy, will inform the members of parliament about the impact that the inclusion of each product in the basic food basket with a zero rate will have on the standard rate of the future Value Added Tax (VAT). According to the government’s original text, it would be 26.5%, but it could increase if Congress decides to include exceptions.
“This was discussed and Appy was supposed to pass on to them the impact of each exception. Just as we did with the PEC [proposta de emenda à Constituição] of tax reform. With each proposal, we have a model that works, it worked well in the PEC and will work well in regulation,” concluded Haddad.
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