Potential minister if Lula wins election assures fight against inflation is at the root of deindustrialization and inequalities the country is experiencing
If you ask him about the latest polls, he wobbles in his seat. The latest polls point to a slight decline in Lula da Silva’s advantage over Jair Bolsonaro ahead of Brazil’s presidential election, which will have its second and final round next Sunday. The five-point lead from the first round has become four in recent polls. “It will be close,” says this economist, a professor at the University of Brasilia, whose name sounds like a candidate for a ministry in the economic field in Lula’s government. José Luis Dacosta Oreiro regularly crosses the pond to participate as a professor in a master’s degree at the University of the Basque Country, in the Faculty of Economics of Sarriko. This week, a dissertation tribunal attended that faculty and gave the students a lecture, the result of their country’s experience, of full relevance: the risk that high interest rates to fight inflation will put growth to an economic sleeper.
– Has the economic debate become the most important element of the presidential campaign?
– If you had asked me a year ago, I would have said yes, but not now. Since shortly before the first round of elections, other issues have gained in importance. 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” like the left is trying to teach kids sex in schools. It’s what economist Paul Krugman defined as “weapons of mass distraction.” You take economics out of the debate and take it elsewhere.
– It is curious, because it is a country with serious problems of economic development, inequality, poverty…
– Effective. Out of a population of just over 211 million, 33 million are in a situation of poverty and 100 million are not guaranteed the ability to 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 makes up 50% of the working population.
– Informal sector?
– They are people who do not have an employment contract. In addition, 25% of the working population is self-employed with a survival formula.
– There are many voices also warning of the risk of excessive government spending at the hands of Lula, which could cause restraint in the financial sector and thus the difficulty of financing the debt burden.
– Actually, I think what happens is that when journalists ask for an opinion about the economy, they often resort to banking economists…
– Something that is becoming increasingly common in Spain has also emerged in the debate on these elections. The need for tax reform.
– In our case, it is because we have a reform that has been pending for twenty years. The industry pays a lot of taxes. 47% of indirect taxes are provided by industry. In addition, the income tax is absolutely regressive. The table has not been adjusted for inflation for ten years and the liberal professions can hide behind a commercial company, with a very low tax burden. Currently, those who pay the most in Brazil are civil servants. I am and pay about 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 lower taxes.
– What do you think is the legacy of the Bolsonaro government?
– Bolsonaro has destroyed all government policies in our country. Control in the Amazon; public health in which compulsory vaccination against polio has even been abolished; a 90% reduction in the science and technology budget. Everywhere you look it’s a mess.
– Is inequality the biggest problem in the country?
– There are two unified 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 estate in developing countries. And it has continued to decline ever since. If you lose the industry, you lose the sector that pays the highest salaries and has left many people behind in their existence. Selling things at traffic lights, begging. Even in Brasili, our Versailles, people live on the streets.
– What is your formula for trying to overcome this situation?
– Invest in training and support the re-industrialization of the country.
– And why did this deindustrialization take place?
– It is because of this pitfall to reduce inflation, but in exchange for a very high short-term exchange rate, which has reached 25% in some years and an exchange rate where the currency is highly overvalued, combined with trade liberalization. Any investor who can earn 10% by lending money to the government is not at risk in a company.
– I’m going back to the beginning of the interview. The left and right voices are more or less divided into two halves. What is the reason for such a distribution 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 was acquitted and it has not been possible to prove that he had any part in it, but there was talk of corruption. The second is the rise of the evangelical church, which carries a curious message: you have to win God to get rich. That, in addition to banning women to the background or not accepting homosexuality. Look, 10% of the Brazilian population believes the Earth is flat, that’s all I’m telling you. And there’s a third reason… but it’s hard to say.
– 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 sections of the population that we can identify as middle class, professionals or workers with acceptable salaries, have always had in-house housekeeping. In fact, it is common for all residential buildings to have a doorman, while in Spain you have automatic doormen. Well, in Lula’s previous government there was a significant increase in the minimum wage and many of these families can no longer do domestic work under the same conditions. It may seem strange, but that has created a feeling in that part of the population towards Lula because they feel he has taken something from them.
He is the son of a Galician, born in Mazaricos, a town in La Coruña, who emigrated to Brazil in 1954 with a brother, while another emigrated to Germany. His mother is Portuguese and his parents met in Brazil, where he was born, to guide his steps in the academic path of economics when he was young.
– His name sounds like a candidate to hold the post of Minister of Economy in case Lula wins the election.
– (Smiles) It could be, but you never know. Actually a ministry in the economic field, because Lula’s idea is to separate again what Bolsonaro united in the Ministry of Economy, in which he united Finance, Planning, Labor and Development and Industry. I can already tell you that he will not become finance minister because it needs a politician, not a technocrat like me.
– A politician in the treasury?
– Yes, in this case it is justified. Lula will meet with the most right-wing parliament in Brazil’s history. That requires a politician to negotiate fundamental issues, such as the budget. And a technocrat in the midst of politicians tolerates little…
– Is it better to have one or more voices in a government discussing economic measures?
– Traditionally, in Brazil, the Ministry of Finance has always been more orthodox and the Ministry of Planning has been more development-oriented. Lula’s style is very peculiar because he likes contradiction in the debate about ideas. That is, when a reading is being studied, call a person and listen. Then he calls another and listens to him. And so on until you have all the arguments for and against. And then decide. He is a very smart boy.
– If you look at Lula’s election manifesto and the parties that support him in his bid to return to the presidency, you might think that this is an exact copy of what Pedro Sánchez is doing in Spain. Help for families, tax increases, higher government spending, labor reforms…
– It’s true. At the moment in Brazil, the easy charge against Lula is that he is a communist.
– Well, radicalization leads to things like this. In Spain, anyone who criticizes 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 gone further than falling into 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.
Source: La Verdad
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