© Reuters. Minister of Finance, Fernando Haddad 02/28/2023 REUTERS/Adriano Machado
(Reuters) – Finance Minister Fernando Haddad said on Friday night in an interview with CNN Brasil that he was “concerned” with the Brazilian credit market, and described the turnaround in interest rates in Brazil as “very strong”.
According to Haddad, the cut in interest rates by the Central Bank was “scheduled” to happen at the beginning of this year, which ended up not happening.
According to him, when the government released the first package of economic measures, the expectation was that it would contribute to the BC’s decision to lower the Selic basic interest rate, currently at 13.75% per annum.
Haddad also stated that he is not worried about the relationship between President Luiz Inácio Lula da Silva and BC President Roberto Campos Neto. “I’m more concerned about what’s happening in the credit market,” he said.
“I have testimony from many solid companies that, when interest was at 2% (per year)… solid entrepreneurs took loans at 6%, 6.5%. Today, these same entrepreneurs are rolling at 20%,” he said.
According to the minister, the measures taken by the government of Jair Bolsonaro before the 2022 elections caused the market to start charging ever-increasing interest rates to roll over its debts.
Haddad also classified the Brazilian credit as “very bad”. “We don’t have a credit system in the country.”
At another time, the minister said that he has maintained dialogue with Campos Neto. According to him, the executive secretary of the Ministry of Finance, Gabriel Galípolo, “has been talking even more”.
TAX AND MONETARY POLICY
Haddad also addressed, during the interview, the relationship between fiscal policy and monetary policy.
“This division between monetary and fiscal policy is a way of thinking about the economy that, perhaps, cannot translate the complexity of this organism, which has two arms, fiscal and monetary”, he pointed out.
Haddad defended the establishment of a “relationship of trust” between the government and the Central Bank, so that they can walk in the same direction.
At the same time, Haddad discussed the handling of monetary policy by the Central Bank.
“Europe is keeping interest rates negative even now. Inflation in Europe dropped from 9.2% to 8.5% recently. And Europe celebrated. Why the ECB (European Central Bank) doesn’t give an interest rate shock ?” asked Haddad. “Because after practicing negative interest rates for so long, what will be the impact in the real world?”, he pointed out.
The minister defended the fight against inflation, but showed concern with the level of interest.
“My concern, as finance minister, is a calibration (of the interest rate). We need to know how to navigate in turbulent seas.”
Regarding the bankruptcy of the US bank SVB, which occurred this Friday, Haddad said that the announcement was worrying. “We need to see if it’s systemic.”
NEW DIRECTOR OF BC
Haddad also took advantage of the interview to discuss the BC’s autonomy, approved during the Bolsonaro government. Due to autonomy, Lula cannot change the president of the BC in his first two years of government.
“After the BC’s autonomy, the entire technical body, from the presidency down, had to have adopted a posture of political abstention. Because that’s how it is in the world”, he said.
Campos Neto has faced wear and tear this year with the PT administration due to news that he would have gone to vote in last year’s election wearing a Brazilian national team shirt – a symbol of identification of Bolsonaro voters. In addition, he was also part of a group of ministers of the Bolsonaro government on WhatsApp.
Haddad also said that the adoption of BC autonomy may not have come at the ideal time. “Perhaps we introduced this passage into Brazilian legislation, at the worst moment… If this had been done in the Fernando Henrique government, in the transition to Lula…”, he commented.
Asked about the name that will occupy the BC’s Monetary Policy board, whose director, Bruno Serra, is leaving, Haddad said he had taken President Lula — responsible for choosing — three professional profiles: one more academic, one more technical. and one more market. “Any one of the three he chooses will make a contribution to the BC”, he said, recalling that in Lula’s first government, the chosen directors had technical profiles.
(By Fabrício de Castro, in São Paulo, and Isabel Versiani, in Brasília)