Goldman Sachs’ Latin American Research Director Calls for Brazilian Fiscal Reforms

By Jack Arnhold, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Alberto Ramos, head of the Latin America Economic Research team in the Global Investment Research Division of Goldman Sachs, has called for an “ambitious reform agenda” in order to unlock sustainable growth for the Brazilian economy and to undo the damage done by previous administrations.

In a recent interview with Valor, the economist announced that the very engine of economic growth has suffered “structural damage” due to a combination of factors. In particular, Ramos points out a “low level of investment, large leverage [financial indebtedness] of the three great agents of the economy – families, companies and government – and the poor allocation of resources caused by the distortions of the Nova Matriz Macroeconômica (New Macroeconomic Matrix).”

The New Macroeconomic Matrix is a term used to refer to the Brazilian government’s interventionist approach to economic management under the last term of Luiz Inácio Lula da Silva’s reign and also during his successor Dilma Rousseff’s first term.

The key to growth, according to Ramos, lies in an “ambitious reform agenda” that includes, but also goes beyond, the controversial social security reform that Brazil’s current Economy Minister, Paulo Guedes, is trying to push through Congress.

The other measures that Ramos deems necessary include “reducing the weight of the state to increase the efficiency of public spending, increased commercial openness, increased private savings, and investing more in both human and physical capital.” As Ramos comments to Valor, this is a well-known agenda that goes beyond the mere cutting of red tape and tax reform. “This would lead to an investment cycle and an increase in productivity in the economy.”

However, as Ramos told O Antagonista at the end of 2018, this kind of economic overhaul will require “great political skill from Bolsonaro,” an attribute the current president lacks, according to some commentators.

In almost portentous words, the economist said back in November that, politically, Bolsonaro “will face the challenge of putting together a coalition in a Congress that is more fragmented than ever and also less experienced about the legislative process.”

Now, Ramos wants to see Bolsonaro act quickly and “initiate everything simultaneously” in terms of reforms to prevent Brazil from becoming another Argentina, in what he calls the risks of “excessive gradualism.”

He points out how Brazil’s neighbor went for a step-by-step approach to adjusting its fiscal imbalances, then suffered a currency crisis last year and is now in a recession. “Argentina is a lesson which we should study carefully,” Ramos says.