RIO DE JANEIRO, BRAZIL – On his first working day in 2021, President Jair Bolsonaro said that Brazil is “broke”. To supporters, he said he “can’t do anything” and mentioned as an example possible alterations in the Income Tax withholding brackets.
“Brazil is broke, man. I can’t do anything. I wanted to change the Income Tax bracket, then there was this virus, powered by the media, this media with no character,” said Bolsonaro to a supporter upon leaving the Alvorada Palace.
The extension of the personal income tax (IRPF) exemption is one of Bolsonaro’s campaign pledges that never materialized. In 2019, the President mentioned the issue several times by stating that the extension was being studied by the government.
Currently, those earning up to R$1.900 per month are exempt from declaring income tax. Bolsonaro has said that he would like to increase the personal exemption to those with an income of up to five minimum wages (currently R$5,500) by the end of his mandate. However, the plan faced resistance from the economic team in 2019, when government accounts were not yet impacted by the novel coronavirus crisis.
In the conversation with supporters on Tuesday, Bolsonaro also hardened his criticism of the media, which according to him does “a relentless job of trying to undermine the government.” “They will have to put up with me until the end of 2022, you can be sure of that,” he said.
Bolsonaro returned to his regular schedule at the Planalto Palace after 17 days with no official commitments and recess days split between the Santa Catarina coast, in São Francisco do Sul, and the São Paulo coast, in Guarujá.
Tuesday’s public agenda included meetings with Minister of Communications Fábio Faria, of Defense Fernando Azevedo, Chief of Staff Braga Netto and Acting Minister of the General Secretariat Pedro Cesar Nunes, as well as with the President of Caixa Econômica (Federal Savings Bank) Pedro Guimarães.
In the afternoon, amid negotiations of a vaccine against Covid-19, Bolsonaro also made an unscheduled visit to the Ministry of Health.
Economists claim Brazil is not broke and criticize Bolsonaro’s stance
President Bolsonaro’s statement that Brazil is broke and that he can’t do anything about it was met with criticism from economists. According to experts, the president used the concept wrongly and created rumors that could impact the country negatively.
Economist Elena Landau states that the use of the term “broke” was trivialized by Bolsonaro. In her opinion, the statement sends a very negative message to the market, prompting loss of confidence in the country at a time when the government is experiencing a fiscal crisis and is dependent on private investment.
“What will international creditors, what will Treasury creditors think when the President of the Republic himself says the country is broke? This means that the country is unable to pay what it owes,” she said.
According to Ms. Landau, Bolsonaro is still attempting to remove from his remit the responsibility over measures that should be implemented to mitigate the crisis. She points out that the President has prioritized agendas favorable to the military and that strengthen the Armed Forces Budget rather than focusing on assistance such as the emergency aid.
“It is very irresponsible, it merely creates a situation of instability in the areas of interest and exchange, and he makes it seem as though he has no responsibility over it. Where are the privatizations they were going to do, where are the reforms, where is the 2021 budget?” she questions.
In the assessment of economist Raul Velloso, an expert in public finance, the concept used by the President is wrong. “Someone needs to tell him that no country in an emergency will go bankrupt. Even if there is no emergency, particularly a country like Brazil, which does not depend on the dollar to finance its debt,” he said.
According to Velloso, the health crisis that the country is experiencing is unprecedented and depends on government initiatives. He believes the payment of emergency aid is needed and this discussion should not be blocked by the President.
“In a crisis, you only need a justification. And the justification is that people will die on the street if we fail to help [with the emergency aid]. People are being confined, and now with a second wave,” he said.
According to economist Juliana Damasceno, a researcher at Ibre FGV, one could only claim that the country is broke once all avenues for solving the fiscal issue have been exhausted, which has not yet occurred.
“His statement that the country is broke seems as if there is nothing to be done, which is not true,” she said.
Juliana says that the government has not been able to articulate and push forward proposals that would boost public accounts, such as reviewing fiscal incentives, reforming social programs, administrative reform, privatization, corrections to the spending cap and other adjustment measures.
“There are a number of steps the government could take before saying it is broke. If the country is broke it’s because we didn’t do our homework and refuse to do something now, we’re still idle,” she said.