I watched, of course!, Roberto Campos Neto’s interview with “Roda Viva” this Monday. I prepared myself, pen in hand, to find out why the real interest rate in Brazil is the highest in the world. I’ve always understood, and everyone says, that this is a risk metric. Therefore, those who finance the government would demand greater guarantees in the face of an eventual default. Question: Is there a safer bet today than government bonds? Is there really any risk, albeit remote, of defaulting on the debt, all of which is contracted in reais? The answer is no”.
If so, why do we have the highest real interest rates in the world, around 8%, when the second highest rate, in Mexico, is 5.5%? When Campos Neto broached the subject, citing that country, he stated that our rates are historically higher than Mexico’s. All right then. Should I settle for that answer? More: is the Brazilian debt, given the size of the economy, a problem to the point of justifying such a price? Let’s follow.
The answer obviously did not appear in the interview. Here and there, Campos Neto timidly praised the economic team and the government’s fiscal effort with the enthusiasm of someone sucking an old umbrella handle — a new one would still exude, I don’t know, the odor of some polymer… Okay. President of the Central Bank, one might observe, does not really need to be very enthusiastic. I also think. I recommend that you do not vote in the uniform of a presidential candidate and that you do not participate in the WhatsApp group of the defeated government. Not the victor. After all, autonomy, as I deduced from her participation in Roda Viva, is almost a state of bliss.
He had already stated in a seminar in Miami the following pearl:
“The main reason, in the case of BC autonomy, is to disconnect the monetary policy cycle from the political cycle, because they have different lenses and different interests. The more independent you are, the more effective you are, and the less the country will pay in cost-benefit terms of monetary policy”.
BC DIRECTORS OR VESTALS?
So that it was; so that there could be an autonomy “disconnected” from the political cycle, the Central Bank would have to be formed not by people coming from the financial market and with obvious political ties. It would be necessary for the nine directors to be vestals, the virgins who guarded the temple of Vesta in Rome.
They were responsible for maintaining the sacred fire. They were chosen from among the most powerful families, around the age of seven, with the consent of their parents, and prepared to guard the temple. They advised families, could be called upon to resolve family conflicts and even give an opinion on matters of state. They often acted as advisers to the Senate. But attention! Virgins were and had to remain. Breaking chastity meant death: they were either buried alive or thrown from the top of the Capitoline Hill. The nine Central Bank directors run much less risk than the 18 Vestals, right? And, of course, professional virgins are not. Oh yes: a vestal had to serve for 30 years. After that time, she could get married. The quarantine of a BC director is much smaller. And life almost always becomes even more smiling, and the smile even more golden.
WILL THERE BE PAX?
Will the “pax” between the BC and the government be sealed? At a given moment, a generous Campos Neto stated that “it is necessary to have good will with the government”… Yes, you understood correctly… Obviously, he did not suggest any change. And he couldn’t even do it in an interview.
I was dying to know, but there was no opportunity for him to discuss the matter — the Vestals could be more detailed in their conversation with the Roman families —, whether interest at 13.75%, with an 8% real rate, will do The inflation converge to the goal. After all, whose dictate is in demand? There are a lot of people wanting to buy and there is a lack of product, which raises prices. Is that what’s going on? Do we need to slow down growth to put prices back where they belong?
I took a look at the repercussions of his interview in the news media. They were in a state of Joyful Mysteries. From the Annunciation to Jesus among the doctors, one had the impression that everything had happened there…
Do I defend a change in the legislation that regulates the autonomy of the Central Bank? Since I have a hard time dealing with this idea — even the Vestals, in a sense, had origin conditioning — I think this debate is wrong. Furthermore, I recognize that it will not happen because the plot, then, of the Congress that voted on the text has not changed in essence.
Although the Legislative Houses approved Complementary Law 179, it is clear that the BC’s so-called autonomy is part of the great chapter of the “anti-political culture”. There is an influential fantasy according to which it is possible to shield government affairs from the bad influence of politicians — who, therefore, must be called “demagogues”, “populists”, “thieves”… If care is not taken, the country — and the countries — are transformed into a meeting of guilds that claim their autonomy: that of the BC, that of the regulatory agencies, that of the Public Ministry, that of the PF, that of the Public Defender… Some groups are more successful than than others in this effort. How can we forget that hatred of politics helped to create and strengthen Lava Jato, which pushed us towards fascism?
“Ah, but it was Congress that approved autonomy, and important leaders still defend it.” And truth. Those interested knew how to lobby at the right time, taking advantage of the weakness of a rowdy president. And now the thing is done. Even a debate about a possible change in the law, preserving such “autonomy”, is immediately rejected. The fundamental error lies, in fact, in the hatred of politics. The unceremoniousness with which texts are written sustaining the need to shield this and that from politicians should shame the scribes. Little do they realize that they are saying that it is necessary to shield that from the influence of the vote — that is, from the people. And it’s not rare that the magic word with which to offend the opponent comes out: “Populist!”.
THE COPOM. OR “THE MADNESS CONTINUES”
The Focus Bulletin, the Central Bank’s survey of the financial market, predicts that the Selic rate will reach 12.75% at the end of the year, with inflation at 5.79%, which would imply real interest rates of 6.96%. And they would still be… the tallest in the world!
It is curious that some lorpas maintain that, by criticizing the BC, Lula would be looking for a scapegoat for this year’s low growth. But this year’s low growth forecast has been given since 2022! And it can be even worse. To “Roda Viva”, Campos Neto denied that credit is drying up. And yet it is. As ten out of ten bankers know. Especially because the banks’ balance sheets have deteriorated significantly, and this will imply risk aversion.
Thus, as a doxa, an interest rate is maintained that prevents the country from growing. The BC has autonomy. The president protests. And he is accused of seeking scapegoats.
If anyone has found out, please let me know:
a: why does Brazil have the highest real interest rates in the world?:
b: is there a risk, albeit remote, of a default on the internal debt?;
c: Is the current inflation due to demand — and therefore, does it respond with a drop in interest rates?
I even apologize for not letting myself be mesmerized by Campos Neto’s sugary rhetoric. It’s just that I sought answers to questions that seem important to me. And they weren’t there. His greatest daring was even the conjugation of “abster-se” in the first person of the preterit of the subjunctive: chipped a “if I abstended”.
Well, even if I refrained from making that fix, the answers wouldn’t be there. Making a mistake, in this case, is not that serious. But what about when you make a mistake with an interest rate that goes from 2% to 13.75% in 17 months? In the period, the financial cost of companies grew seven times and remained at the top. Given the reactions, however, Campos Neto seduced. Even with its subjunctive — assuming they noticed, of course…