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Li o Livro Amarelo e REFUTEI o plano econômico do Renan Santos — Transcript

by Charlie Barkley · 15,954 words · 2,544 segments · language en · Watch on YouTube

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0:00Hey guys, how is everything going with
0:01you? After many months of promises,
0:05this day has finally arrived, the day I
0:08will break down and refute once and for
0:11all Renan Santos 'economic program. But
0:28before we go properly into our
0:30refutation, I’m going to ask that,
0:32please, please, please, please, leave a
0:35like and share the hype, because I went
0:37so many weeks without posting a video
0:40after my second daughter was born that
0:42YouTube simply killed my engagement; it
0:44ended it, destroyed it, and it's hard
0:47to get it back. So it is very important
0:51that you interact in every way possible
0:53so that this video is delivered to as
0:56many people as possible, okay? Remember
1:00that it costs absolutely nothing and
1:02you will help me immensely, alright? I
1:05don’t even like talking about this,
1:07but you know, it’s that kind of video
1:08, okay? Today's video is a lot of work
1:10to make, it takes a lot of work to make
1:11. So, please, cooperate, okay? This is
1:14the most requested video in the history
1:15of this channel. I have no doubt,
1:17everyone wanted to see me analyzing the
1:19yellow book, alright? So, the least I
1:21ask of you is to leave a like, the hype
1:24, comment, and of course, send this
1:26video to people you know, right, who
1:28are fans of the Mission, because I
1:30think the audience I most want to talk
1:33to might be those people. And just one
1:37more very important thing, all the
1:39links I left pinned for signing up for
1:42my book club were opening the wrong
1:44form. So, if you did manage to sign up,
1:48I’m very sorry, but you will need to
1:50sign up on the form again, but this
1:52time on the correct form, otherwise I
1:54won't have a way to contact you, okay?
1:57I know, I know. I was very stupid
2:00because I posted the same link with the
2:02wrong form several times and I didn't
2:04realize it in several different videos,
2:06okay? So, if you wish to participate in
2:09our book club, which starts next week,
2:12sign up on the form that is here in the
2:14pinned comment. Remembering that if you
2:17are already a member of the channel,
2:19you already have the right to
2:20participate in the club automatically,
2:22okay? So don't waste time because this
2:24month we are going to read a book about
2:27laborism, alright? And it's going to be
2:29awesome. Consider this video an
2:32experience, okay, of what you can
2:34expect from my book club, which will
2:36basically be a study group, alright?
2:40And now, everyone, to start, first of
2:42all, a few considerations. First, I
2:46will critique the chapter "A Bitter
2:48Medicine," which is in the final
2:50version of the yellow book and is
2:51effectively Renan Santos's government
2:54plan. I’d like to thank my follower
2:57Paulo, who is a supporter of the "
2:59Missão" movement and took the trouble
3:01to digitize the entire chapter and send
3:04it to me, since I don't have the final
3:06book. I have several MBL books here,
3:08I’ve read them all, okay? But I
3:11didn't have this final version of the
3:12book. So I really thank Paulo a lot,
3:15because it helped me immensely in
3:17producing this content here. Another
3:21thing, I am setting out to refute this
3:23project because I believe I have enough
3:25study and knowledge to disagree with
3:27what is here, alright? But that doesn't
3:31mean I own the truth, especially since
3:34I'm not an economist and I can
3:36naturally make mistakes. Therefore, I
3:39will seek to back up my arguments with
3:42literature from people who evidently
3:44know much more than I do. So, if you
3:47are a supporter of the "Missão" party,
3:50I ask that you keep an open mind to
3:52hear my arguments and that you check my
3:55sources later, because this video has
3:58no intention of being a mere narrative
4:00dispute, okay? My intention with this
4:03video is to qualify the electoral
4:05debate. The goal of my refutation today
4:09is to demonstrate, based on economic
4:11science, the problems that exist here
4:13in this book, alright? And I will do
4:16this by seeking to be as intellectually
4:20honest as possible. Got it? And one
4:24last thing, unlike my usual video
4:26essays, in this one, I am going to read
4:29the chapter, okay? Page by page, so you
4:32know exactly which points I am going to
4:35criticize. So, brew some coffee, make
4:38some popcorn, or do like I do: put on
4:39some headphones and go wash the dishes,
4:41which is something I do a lot while I
4:43wash dishes—I listen to something,
4:45okay? Because we are going to be here
4:47for a while. And now, without further
4:50ado, let's get to the program. "A
4:52Bitter Medicine," the urgent fiscal
4:54adjustment to unstick the Brazilian
4:56state. The Brazilian government today
4:58does not have money to spend. Our
5:00project is to transform Brazil in 30
5:03years into one of the five largest
5:05global powers. To do so, it will be
5:09necessary to release a great investment
5:11capacity to fund infrastructure
5:13projects, cutting-edge technology, slum
5:15upgrading, and international projection
5:17. In practice, the most immediate risk
5:20is the imbalance of public accounts, a
5:22chronic issue in the country that has
5:25persisted since before the Real Plan.
5:29After the plan's implementation, the
5:31main instrument for fiscal adjustment
5:34was raising the tax burden, a model
5:37that dried up investment sources and,
5:39ultimately, proved unable to sustain a
5:426%average annual growth in public
5:45spending. And here is where a first
5:48problem begins, because notice that the
5:50book says that the rise in the tax
5:52burden was the model responsible for
5:54drying up investment sources. Therefore
5:57, without investment, growth capacity
5:59was limited, and this caused the
6:01average increase in public spending to
6:03be unsustainable. However, this
6:07explanation ignores that the post-Real
6:09macroeconomic regime itself was
6:11responsible for altering the relative
6:14profitability of productive investment,
6:17especially regarding industrial
6:19investment. Because how was the Real
6:22Plan sustained? Through high real
6:25interest rates that limited investment
6:28capacity, okay? Another step in
6:31sustaining the Real were the various
6:33cycles of exchange rate appreciation
6:36that flooded the domestic market with
6:38imported products. Remembering that
6:41this occurred in the face of a
6:43financial opening that began and was
6:46intensified excessively in the 90s,
6:49okay? Not to mention the fiscal policy
6:52centered on primary surpluses that
6:54officially began with the macroeconomic
6:57tripod of '99. It is evident that I am
7:00not here to defend increasing the tax
7:02burden, especially in the Brazilian
7:04mold, okay? I really don't want to do
7:08anything like that, but there is no
7:10mechanical relationship between an
7:12increase in the tax burden and a drop
7:15in investments, as the book is assuming
7:17here, okay? This mechanical
7:20relationship between one thing and the
7:22other does not exist. During the
7:25postwar period, especially between the
7:2870s and 90s, countries like Germany,
7:30France, Japan, and Denmark had a high
7:33tax burden and yet they all had capital
7:36accumulation and high rates of growth
7:39and development, okay? What am I trying
7:43to say with all this? That right at the
7:46beginning, the diagnosis of Renan
7:49Santos' program already starts, in my
7:51view, hitting the symptoms, but without
7:54even mentioning the disease, okay? That
7:58which should really be the concern. And
8:00what is the disease? The disease is the
8:03very model that was adopted after the
8:05Real Plan. And what model is that? The
8:09model based on the macroeconomic tripod
8:11, that is, the primary surplus targets,
8:13the floating exchange rate regime, and
8:15the inflation targeting regime. All of
8:19this is based on the theoretical
8:20framework of the new macroeconomic
8:22consensus that we laborists are already
8:24tired of criticizing. Anyone who
8:27follows our work knows that we are
8:29always complaining about this model,
8:32this consensus that was adopted by
8:34Brazil during the 90s, okay? So, the
8:37first thing you need to understand
8:40about Renan Santos's bitter medicine is
8:42that he is by no means proposing a
8:45structural reform of the current
8:47Brazilian economic regime. Okay? And
8:51here he continues with the result, the
8:55result was the Dilma administration
8:58crisis, right, completing the stanza.
9:01In other words, the conclusion here is
9:03the liberal standard of saying that the
9:05Dilma administration crisis happened
9:07due to a lack of control over public
9:08spending. And look, I will be honest
9:11and say that I expected a denser
9:14introduction, okay? That could give
9:16meaning to what they are defending here
9:18. Except that the explanation is not
9:21only wrong, it is also absurdly
9:23simplified, right? Because in one,
9:26because in one stanza they already
9:28arrived at the cause of the Dilma
9:29crisis, right? Like, very quickly. So
9:32let's go, because I, I honestly will
9:35have to elaborate on this part. The
9:38Dilma administration crisis did not
9:40happen because of excessive spending.
9:43And this is fundamental for you to
9:45understand, because if you want to
9:47think about how to develop Brazil, the
9:49first step is to make a correct
9:50diagnosis, okay? And this conclusion
9:54here, it is simply wrong. The trigger
9:58for the Dilma administration recession
10:00was due to the drop in gross fixed
10:02capital formation in the second quarter
10:04of 2014, which plummeted 11%compared to
10:07the same quarter of the previous year
10:09and continued to fall in the following
10:11years. In other words, the initial
10:15shock of the crisis was a collapse in
10:18investment and not unchecked public
10:20spending, as is implied here. And this
10:24happened because Dilma basically
10:26inherited the economic inconsistencies
10:28of the Lula administrations, because
10:31Lula never tried to break with the
10:33model that was instituted in Brazil by
10:35FHC. Lula was a mere administrator of
10:39this model, okay? Lula maintained this
10:42legacy, he never broke with it, he
10:44never tried to break with it. And what
10:47were the consequences of this model?
10:50And I repeat, an overvalued exchange
10:53rate for most of the time, mainly as a
10:55result of the commodities boom, which
10:58was driven by China's growth in the
11:00early 2000s, as you well know, okay?
11:04Another element of this model was
11:07excessively high interest rates, due to
11:09the fiscal anchor of the tripod, which
11:12is the inflation targeting regime,
11:14which lacks the capacity to bring real
11:17rates below the economy’s own growth,
11:20since part of our inflation is inertial
11:22; meaning, it cannot be controlled via
11:25interest rates. Besides, during the
11:30Lula administrations—and this is a
11:32criticism that PT supporters usually
11:35don't like—real wages grew faster
11:37than labor productivity, which
11:40increased the unit labor cost and
11:42helped compress industrial profit
11:44margins. And so, the rise in unit labor
11:49costs, plus a strong currency, made it
11:51difficult, for instance, to pass these
11:53costs on to prices because, with a
11:55strong currency, there was enormous
11:58competition from imported products,
12:00right? Because they become very cheap,
12:02you flood the place with them, and then
12:04how is the national industry going to
12:06compete with what comes from abroad,
12:07right? You know when we talk in a
12:10general way about the
12:11deindustrialization process that Brazil
12:13suffered, including under Lula's watch?
12:16Well, that is what we are talking about
12:19, because the profit margins of
12:21non-financial companies, especially
12:23industrial ones, were increasingly
12:25compressed, to the point that at a
12:28certain moment they started to be
12:30negative in real terms. That was the
12:33situation during the Dilma
12:35administration, okay? Due to these
12:37inconsistencies inherited from Lula's
12:40previous PT governments, the new
12:42economic matrix proposed by Dilma aimed
12:45precisely at solving this problem. So
12:49much so that it was based on three
12:51pillars: a drastic reduction of the
12:53SELIC rate, exchange rate depreciation,
12:56and broad tax breaks and incentives for
12:58the private sector, because supposedly
13:00the combination of these pillars could
13:03recover industry competitiveness and
13:05induce investment. That, at least, was
13:08the idea behind Dilma's new matrix. The
13:11problem is that this strategy depended
13:13on the reaction of private investment
13:16and other conditions that the
13:17government did not fully control, okay?
13:20Such as, for example, inflation and all
13:23the business expectations related to
13:26the international scenario during that
13:28period, okay? They were not good. And
13:31so, the government doesn't control that
13:33; it doesn't control expectations, it
13:36doesn't directly control inflation,
13:38okay? The government could not control
13:40these things, okay? It could not.
13:42Because look, folks, this is Keynes 101
13:46, okay? Even his little book is right
13:48there. This here is Keynes 101, plain
13:50and simple. You can lower interest
13:53rates as much as you want, okay? But if
13:56the expected profitability for
13:58entrepreneurs is negative, they won't
14:00invest. It doesn't matter, okay, what
14:03the interest rate is; you can cut it as
14:05much as you want, there won't be any
14:07investment if there's no good
14:08expectation, okay? And Dilma, she made
14:11a choice; she prioritized tax breaks
14:13and incentives instead of pursuing, for
14:16example, a consistent expansion of
14:17public investment. And the result, in
14:21the end, was that the industry used all
14:23of that to restore their profit margins
14:26that were negative, and not to make
14:28investments, alright? And then,
14:31starting from that failure, a series of
14:34factors began to accumulate, because
14:36the tax break policy also contributed
14:39to a deterioration of the fiscal space
14:42itself, and at the same time,
14:44Petrobras's investment also fell during
14:46that period. And then, of course,
14:49there's all that discussion about the
14:51effect of Operation Car Wash on this
14:52drop at Petrobras and so on. But look,
14:54that doesn't matter. Now, what's
14:56important is that Petrobras's
14:58investment fell at that moment, and
15:00that added to the drop in gross fixed
15:02capital formation, okay? Which had
15:04started in the second quarter. So, what
15:07really matters about all this that I'm
15:10saying is that these things became a
15:12snowball that ended up worsening, right
15:15, that ended up worsening the Dilma
15:17government's recession, which started
15:19—I repeat, I repeat again until you
15:22get it into your heads—it started
15:24with the drop in gross fixed capital
15:27formation because there was no
15:29investment. Alright? That was the
15:32government's collapse, that was the
15:34trigger for the debt. It has nothing to
15:36do with spending. Nothing at all. And
15:38then in the midst of the recession, or
15:40rather, it does have to do with
15:41spending. But contrary to what you
15:43think, contrary to what the yellow book
15:45is putting here. And then in the midst
15:47of the recession, Dilma put Joaquim
15:49Levy in the Finance Ministry and did a
15:52U-turn in economic policy, promoting a
15:54strong fiscal adjustment that the
15:56financial market wanted her to do.
15:59Alright? It wanted to, she followed the
16:01market, and at the same time, besides
16:04doing that, she also messed up by
16:06realigning administered prices all at
16:09once, okay? Along with a currency
16:11depreciation. And so, what was the
16:13result of this whole game? Inflation
16:17exploded, and workers 'real income fell
16:19, and then consumption collapsed. And
16:23that is what actually deepened the
16:24recession. The recession starts with
16:27the investment issue and deepens due to
16:30a poorly formulated fiscal policy,
16:32alright? Due to a bad diagnosis. Dilma
16:37falls while doing what the market
16:39wanted; it wasn't because of excess
16:42spending. The deepening of the crisis
16:45was actually just the opposite, okay?
16:48It was the spending freeze, it was the
16:50contraction of spending that ended up
16:52intensifying it. Why? Because she ended
16:54up implementing a pro-cyclical economic
16:56policy in the face of an already
16:57recessive landscape. And that is where
17:00we have the story of that bizarre
17:02crisis that shook the Brazilian economy
17:05at that time, okay? So, notice that
17:08this story of uncontrolled spending is
17:12simply false. It is not supported by
17:16any data, okay? To defend that, people
17:18always have to make huge logical leaps.
17:21The explanation for the Dilma crisis is
17:22much more complex than this issue of
17:24spending. Much more, and besides that,
17:27as I said, but I repeat, she fell doing
17:29the opposite of what they accuse her of
17:31today, okay? She fell by following the
17:34financial market, doing exactly what it
17:36wanted her to do. And look, I'm not
17:40making this up in my head, okay? Read
17:42this little book here, it's fundamental
17:44to understanding the Dilma crisis, by
17:47economist José Luiz Oreiro, okay? Read
17:49this book here. Its name is The
17:51Macroeconomics of Brazilian Stagnation.
17:56It's a very, very good book, where he
17:58details, he tells us, in detail, about
18:00everything I'm talking about here, okay
18:02? So, if you've never sat down to read
18:05about the Dilma crisis, man, get this
18:07book and read it, okay? Because it is
18:09very well-founded. And another thing, I
18:13challenge you liberals, fans of MBL, of
18:15Renan, of Missão, to refute this
18:18thesis that I just presented to you,
18:20okay? Refute it with data and arguments
18:24. Verifiable ones. Seriously, comment
18:26here and prove to me that I am wrong.
18:29Comment here and show me that this book
18:31here is full of wrong data, from wrong
18:33sources. I would really like to see it,
18:36because in my view there is no
18:37discussion today, okay? If you sit down
18:41to debate this and concretely analyze
18:43the context of that time, you won't
18:46reach this type of conclusion, okay?
18:49Which is a very bad, wrong, simplified
18:51conclusion, right? And just to close
18:55and provoke you even more, you who are
18:57the militants of Missão, the failure
19:00of Dilma's new matrix happened because
19:02her government's diagnosis started from
19:04the same logic as the Missão
19:06government's plan. Look how interesting
19:09that is, okay? Which is believing that
19:12you will develop the country, that you
19:14will industrialize this country without
19:16making a structural change in the
19:18economic model. I'm not saying that
19:21Renan's plan is the same as Dilma's
19:24plan, okay? What I am saying is that it
19:27presents the same inconsistency between
19:30proposal and objective, right? Because
19:35the new economic matrix, contrary to
19:37what many people think, was not a
19:39reform, okay? It wasn't, it wasn't even
19:42an attempt. And throughout this video
19:45it will become very clear to you why,
19:47okay? So, what is my conclusion based
19:51on the very beginning so far? The
19:54yellow book's diagnosis is definitely
19:57wrong. And that creates a huge problem.
20:00Why? Because if your diagnosis of the
20:03Brazilian economy's trajectory is wrong
20:05, it is evident that your project will
20:07be too. Got it? Also, take note,
20:11understand, I made a counterpoint to
20:13the diagnosis just now, because you
20:15need to keep my diagnosis of the Dilma
20:18crisis in mind, okay? To understand the
20:21criticisms I will raise here to counter
20:23the book, okay? So, starting here, in
20:26my opinion, it is refuted, it is
20:28refuted from A to Z, okay? And this
20:31diagnosis here has no validity. But
20:34let's continue. The radical solution to
20:37the problem was the Temer
20:38administration's spending cap, which
20:40aimed to limit the growth of public
20:42spending to the economy's total. A
20:44laudable goal, but repeatedly violated
20:46during the Bolsonaro administration
20:49until it was finally broken with the
20:51transition amendment in 2022. The new
20:55fiscal framework instituted since then
20:57has returned to the old Workers' Party
20:59model of increasing tax collection to
21:02compensate for unchecked spending
21:04growth. The current model favors an
21:08environment of expansionary fiscal
21:10policy that increases expectations of
21:12debt growth and, therefore, interest
21:14rates, making it difficult to stabilize
21:17public accounts. Man, honestly, up
21:21until now I was treating it as a
21:23mistake, but this excerpt here sounds
21:25almost dishonest to me. Temer's
21:29spending cap suffered from exactly the
21:31same problem they are attributing here
21:34to Lula's cap. Temer's cap only
21:38concerned discretionary spending. So,
21:42mandatory spending continued to grow
21:44above the cap and increasingly
21:46deteriorated the space for public
21:48investment. This has always been the
21:51central criticism of several economists
21:53, such as José Luiz Oreiro himself,
21:54whose book I recommended just a moment
21:56ago. The only difference between the
22:00cap and the framework, which is also a
22:03cap, is that Temer's cap did not allow
22:05for any real growth, while Lula's
22:08fiscal framework has a real growth cap
22:10of up to 2.5%. Okay? In other words,
22:15above inflation. Haddad instituted this
22:18cap because, from the beginning,
22:20Temer's cap always proved to be
22:22absolutely impractical. that was not a
22:26praiseworthy project, but an economic
22:29oddity justified by the misguided
22:31diagnosis that the Dilma crisis was due
22:34to excessive public spending. But look,
22:37I have already proven to you that this
22:39is not true, that is not what happened.
22:42And you see how the yellow book just
22:45brings up the same type of diagnosis
22:48that was already being raised a decade
22:50ago, okay? It was already being raised
22:54by those who were already practicing
22:55the old politics. In other words, so
22:58far there is nothing innovative here,
23:00okay? Just the same old liberal
23:03mistakes as always. And I say this part
23:07here is dishonest, because they frame
23:08the spending cap as a laudable attempt,
23:10while Lula’s fiscal framework is a
23:12return to the Workers 'Party model, a
23:14return to the old model. Man, that is a
23:17lie. That is, that is simply a lie.
23:20Both caps are the same, with Lula's cap
23:22being a little more flexible, just a
23:24little. It is by no means an old model,
23:28not least because in the past there was
23:30no cap, there was no such policy, man.
23:33So, it is evident that this is not true
23:36. The existence of the cap worsened the
23:39quality of spending, which was already
23:41poor, whether under Temer or with Lula
23:43now. All right? We laborists have been
23:47hitting Lula day and night since he was
23:50elected, precisely because he has done
23:52nothing to end this nonsense. And the
23:56MBL says the economy has simply
23:58returned to its old mode of operation.
24:00Man, honestly, for the love of God,
24:02guys, give me a hand here. This is not
24:04true, it is false, okay? Quite the
24:07contrary, Lula's cap remains in force
24:10because the PT's economic diagnosis is
24:12the same as the MBL's economic
24:14diagnosis, okay? The only difference is
24:18that the MBL is much more fiscalist.
24:21That is true. It is much more fiscalist
24:23than the PT. All right? And look at
24:25this ending here. The best example is
24:27that while the new fiscal framework
24:29limits total expenditure growth to 2.5%
24:32per year, spending on social security
24:34and social assistance has grown by
24:36nearly 6%per year. In other words, the
24:38same problem I was already talking
24:40about in the current outlook, the
24:42primary deficit could reach about 3%of
24:44GDP by 2036. But the diagnosis of
24:47serious economists is unanimous. Before
24:50that, Brazil will go bankrupt. Man,
24:53look, look at this. So, the diagnosis
24:56of serious economists is unanimous,
24:59meaning there is no debate. What exists
25:03are the serious fiscalist economists
25:05who defend this here and the crazy ones
25:08. See how this is a very efficient type
25:12of rhetorical technique to bury any
25:15serious discussion about this topic and
25:18treat this diagnosis here as if it were
25:21an absolute and universal truth. But
25:25the truth, folks, is that there is no
25:28unanimity in this debate. If you think
25:31that, I'm sorry, but you must be very
25:33limited. You're outdated, you're not
25:35reading enough, okay? Because there is
25:38a vast amount of academic production,
25:41books, articles, etc., that have been
25:43debating these problems of our economic
25:46stagnation for a long time. There is a
25:50ton of new stuff being produced today,
25:52okay? A lot is being produced today,
25:55and there is a lot of material that,
25:57even years after being published,
25:59remains highly relevant. The unanimity
26:03they are citing here is a unanimity
26:05that exists only within the financial
26:08market, okay? It is the unanimity of
26:10the economists who are operating in the
26:12financial market. Just, for example, do
26:15you want to understand the experience
26:17of the Brazilian economic model? Here,
26:19look, I'll give you another
26:20recommendation. Take this little book
26:22here. Monetary policy, central banks,
26:26and inflation targeting, okay? This
26:30book here features the participation of
26:31more than 10 authors. Are you going to
26:34tell me that this isn't serious work?
26:37Talking about the experience of the
26:39Brazilian economic model and this model
26:41around the world as well. Isn't this
26:43serious? Is this the only thing that's
26:44serious? Only those who defend
26:46fiscalism are serious. Please, right?
26:48Come on, man. This is, well, just
26:52nonsense, okay? Nonsense. There is no
26:56unanimity, but let's move on. The
27:00consolidated public sector's nominal
27:03deficit reached 1.2 trillion. According
27:06to Central Bank information, the
27:09federal public debt ended 2025 at 8.6
27:12trillion, a growth of 18%compared to
27:152024. The general government gross debt
27:20reached 80.4%of GDP, 10.4 trillion. The
27:25Senate's IFI, in a scenario without
27:27reforms, projects it could reach 100%of
27:29GDP by 2030. Despite this, federal
27:33public spending excluding interest grew
27:3616 to 17%in real terms in the four-year
27:39period, the 2023 four-year period. An
27:44expense where only about 10%corresponds
27:47to discretionary spending not indexed
27:50to the minimum wage. Mandatory expenses
27:54grow systematically above the 2.5%real
27:57limit of the fiscal framework. Which
28:01means that without structural changes,
28:03the state becomes increasingly
28:05incapable of investing and the
28:07framework becomes unsustainable. Look
28:11at that, finally I can say there is
28:13something I agree with, okay? Because
28:16there is something here that I agree
28:19with, because really, without a
28:21structural change, the state will have
28:24less and less capacity for investment,
28:26especially since the fiscal framework
28:29is absolutely unsustainable. So here I
28:33agree, okay? I agree. But in my opinion
28:37, it should have been abolished.
28:40However, the order of this information
28:43is tied mostly to financial expenses.
28:46But the adjustment that is supposedly
28:48going to solve everything will come
28:50through the primary budget, at the
28:52expense of the worker, right? It will
28:55come at the expense of retirees, people
28:57with disabilities, it will come at the
28:59expense of healthcare, education, and
29:01so on. Especially because you know well
29:03what Kim Kataguiri's proposed
29:04constitutional amendment is, right? The
29:06necessary fiscal adjustment is on the
29:08order of 250 billion, according to
29:10Mansueto de Almeida. To carry out this
29:13type of change, any government from
29:162027 onwards will need to de-index and
29:18decouple expenses, reform social
29:20security, and reduce the growth rate of
29:22the minimum wage. It's exactly what I
29:26just said, right? Exactly. We know very
29:28well who is going to take this bitter
29:31medicine, who this fiscal adjustment of
29:33around 250 billion, which they
29:35mentioned here so far, will fall upon,
29:38right? And a detail: this Mansueto de
29:42Almeida is a former National Treasury
29:44Secretary who is now the chief
29:46economist at BTG Pactual. So, the first
29:50reference that appears here is a banker
29:52who did what everyone does: took a high
29:55public office and used it as a stepping
29:57stone to later be well-employed in the
29:59financial market. But that's fine,
30:02right? That is the, that is the norm.
30:04Solutions and proposals. The first act
30:07of an opposition government, in fact,
30:09to be addressed even before taking
30:10office, will be the approval of a
30:12transition amendment, like the one
30:14promoted by Lula in 2022. In our case,
30:18the transition amendment should use as
30:20a base a project already filed by our
30:23congressman Kim Kataguiri in 2024, the
30:25so-called Fiscal Balance Amendment,
30:27which promotes the de-indexing of
30:30social security and welfare benefits
30:32from the minimum wage, adjusting them
30:34only for inflation, the decoupling of
30:37health and education floors from
30:39revenue, the revision of the salary
30:41bonus, and the reduction of tax breaks
30:45and tax expenditures, with projected
30:48savings of 1.1 trillion by 2031. So
30:52here they list the measures, right?
30:54De-indexing social security and BPC,
30:57savings of 450B, decoupling health and
30:59education FUNDEB 360B, revision of the
31:02salary bonus 108B, reduction of tax
31:05exemptions, tax expenditures 104B,
31:07totaling around 973 billion. That,
31:13right, between 2025 and 2000. and 31.
31:16To this constitutional amendment, we
31:18also intend to add a series of measures
31:20proposed by the "Paths to Development"
31:21booklet. "Stabilize, Grow, Include,"
31:24published by the CDP, the Center for
31:27Public Policy Debates. The document,
31:30which featured contributions from over
31:3350 researchers and economists,
31:35coherently systematized an economic
31:37policy based on evidence, fiscal
31:39discipline, and institutional
31:41rationality. Recognizing the value of
31:45the CDP's technical and intellectual
31:47work, we selected the most interesting
31:50proposals and adapted them to today's
31:52political reality and our understanding
31:54of Brazil: rationalizing the financial
31:56surplus, civil service reform ending
31:59exorbitant salaries, changes to
32:00parliamentary amendments, reduction of
32:03tax exemptions, and a new supplementary
32:05law for public finances. These
32:09proposals should already be present in
32:11our transition amendment draft, which
32:14aims to replace the fiscal framework
32:16with a new, smarter model. It is a fact
32:19that this amendment will be a bitter
32:21pill to swallow. Hence the title of
32:22this chapter. Our neighbors in
32:24Argentina, when they elected Javier
32:26Milei, also had to opt for a bitter
32:28pill to address the crisis that had
32:30plagued the country for decades. In our
32:33case, a bitter pill will also be
32:35necessary to resolve the lost decade
32:37that began in 2014, a result of the
32:39fiscal policy recklessness of the Dilma
32:41administration. False. Only with fiscal
32:45balance will it be possible to achieve
32:47the other pillars of our platform for
32:49the country. The destruction of
32:52organized crime, massive investment in
32:54infrastructure and technology, the
32:56promotion of territory and culture, and
32:59elevating Brazil to the position of one
33:01of the five most important nations in
33:03the world over the coming decades. This
33:07first chapter details the bitter pill,
33:09item by item, explaining what we intend
33:11to do to save the country's fragile
33:13fiscal situation. It’s like this,
33:16look. There is a lot to talk about
33:21regarding this amendment by Kim, but
33:23first I want to get ahead with reading
33:25the other points they are bringing up,
33:27so when I critique the amendment, I
33:29have already taken the other points
33:31into consideration, okay? So, let's
33:34continue here, look. Complete research.
33:39In recent years, Brazil has not
33:40suffered from a lack of technical
33:42diagnoses regarding the problems that
33:44afflict politics, the economy, and
33:45social life in our country. However, we
33:49have always suffered from the political
33:51inability to organize them and
33:53transform them into action. Thus, we
33:56are victims of two historical divorces.
34:00The first between the intellectual
34:02production of public policy and the
34:04practical experience of political life;
34:06the second between the political class
34:08and the understanding of intellectual
34:11production. The yellow book was born
34:14precisely with the intention of
34:16repairing this divide, serving as a
34:18living notebook of public policies,
34:20constantly enriched by the experience
34:22of our representatives and as an
34:24exponent of our vision for Brazil. In
34:27this sense, we have developed numerous
34:29long-term proposals, like those that
34:32will be in the third part of this book,
34:34which depend on a strong economy with
34:36investment capacity. However, our
34:39country has been going through more
34:40than a decade of actual stagnation.
34:42What to do, then? Our solution cannot
34:45simply be "austericide," but a project
34:48for the modernization of the Brazilian
34:50State that leads us to a glorious
34:52future, okay? And so, I already—I
34:56disagree, okay, with the part where
34:58they talk about this issue regarding
35:00the political class and a
35:02misunderstanding of intellectual
35:04production, okay? I don't think there
35:07is, on the part of our political class,
35:09this lack of understanding of
35:11intellectual production. Quite the
35:15contrary, the political class
35:17understands it very well, but they
35:19simply have no interest, okay? They
35:22have no interest because the proposed
35:25solutions would go against their own
35:27privileges, okay? And I'm talking here
35:30about the political and economic class
35:31together, okay? But I'm talking about a
35:36real solution, not what's here, because
35:39this project, really, is in the
35:41interest of the political elite and the
35:44financial elites. Guys, if this project
35:48hasn't gone forward yet, it's because
35:50it's very unpopular. That is true, it
35:53is absolutely unpopular. But if it
35:55depended on the "centrão" in Brasília
35:57, man, if it depended on the "centrão,
35:59" this would have been approved long
36:01ago. Long ago. Especially because
36:05keeping retirees and people with
36:07disabilities on minimum wage is
36:09definitely not part of the desires of
36:11the political and economic elite that
36:13runs this country. Okay? It is not. And
36:18then they continue here. In this sense,
36:21we had contact with the CDP, whose
36:23study "Paths to Development: Stabilize,
36:25Grow, Include" served as a guide for
36:27the incorporation of a series of
36:29proposals. Volume one, which concerns
36:32fiscal reforms, was of great importance
36:34for the research of this first chapter
36:35of the yellow book. Although we did not
36:39adopt it uncritically, we sought to
36:41provide a political translation of
36:43several of the ideas in this volume,
36:45adapting its technical body to a
36:47program aligned with our expectations
36:49of political power, relations with
36:51Congress, and public opinion. We thus
36:55recognize the great technical and
36:57intellectual value of the work produced
36:59by the CDP, which we hope can become a
37:01long-term contributor to the yellow
37:03book. We are committed not only to
37:07proposals but also to methods based on
37:10evidence that seek long-term economic
37:13sustainability and that reject panaceas
37:16and fiscally illusory solutions. We
37:20perfectly understand that we are going
37:22through a period where no easy solution
37:24will be able to deliver a future to our
37:26country and the generations now growing
37:29up. Resuming a sustainable growth
37:32agenda is a precondition for exercising
37:34a sovereign political project, but we
37:36know the transition will be tough. In
37:41this sense, we repeat our thanks,
37:43beyond the researchers of the yellow
37:45book, to the researchers at CDP, who
37:47conducted the original research,
37:49concerned with softening this tough but
37:52necessary transition, giving the
37:54country a feasible economic policy
37:56project that is responsible to present
37:59and future generations. What follows
38:02below is a series of measures that were
38:04addressed and detailed in volume one of
38:06their study and that converge with our
38:08projects. Including ideas already
38:12presented in the fiscal balance
38:14amendment filed in 2024 by Congressman
38:16Kim Kataguiri. And now, something very
38:20important for you: do you know who the
38:22researchers and economists at CDP are?
38:25Do you know? I will name a few for you,
38:27okay? Henrique Meirelles, who was
38:29president of the Central Bank during
38:31the first two Lula administrations,
38:33okay? The first two Lula
38:34administrations. Mário Mesquita, who
38:37was also director of economic policy at
38:39the Central Bank during the Lula
38:41administration, right? Another
38:44well-known collaborator of CDP is
38:46Marcos Lisboa, whom "Mamãe Falei"
38:49often praises, who was Secretary of
38:51Economic Policy at the Ministry of
38:54Finance under Antônio Palocci, who was
38:57Lula's minister, plus other staple
38:59figures of the economic mainstream,
39:02such as Samuel Pessoa, Armínio Fraga,
39:05and so on. So, this research group is
39:10filled with people who have always been
39:12involved in public management since FHC
39:15and who had central roles in the Lula
39:17government, okay? In all of his
39:20administrations. And why was the
39:23research from a group like this
39:24incorporated into the yellow book?
39:28Because this project is about the
39:30continuation of an economic policy
39:33tradition. That has been very well
39:36established in Brazil for a long time,
39:39okay? For a long time. The exacerbated
39:43fiscalism we are seeing here is an
39:45expected consequence of this model,
39:48okay? And one that has always been
39:51defended by its formulators from the
39:53very beginning, okay? It has always
39:55been, it has always been this way,
39:56folks, it has always been like this.
39:58That is why this research was so
40:00important to them. Then we continue
40:02here. New fiscal rule. Brazil suffers
40:05from a structural problem in the
40:06imbalance of its public accounts, which
40:09has not been solved by any fiscal
40:10strategy since the Real Plan. After the
40:14failure of Temer’s spending cap and
40:16the explosion of expenses under
40:18Fernando Haddad’s new fiscal
40:19framework, Brazil needs a definitive
40:21adjustment. International examples have
40:24already established a clear path to
40:26follow in these situations. First, it
40:28is necessary to approve accelerated
40:30adjustments aimed at generating
40:31credibility and making room for
40:33interest rate reductions without
40:34creating inflationary pressure.
40:36According to the World Bank,
40:38maintaining these adjustment measures
40:41for 4 years or more increases the
40:44probability of debt stabilization by
40:46more than 90%. In Brazil's case, these
40:51adjustments can only come through the
40:52path of spending cuts. You heard that,
40:56right? Because they strike at the core
40:58of the financial imbalance, the
41:00uncontrolled growth of
41:01non-discretionary spending, and they
41:03reduce real interest rates. The same
41:07World Bank study reveals that 83%of
41:10adjustments via cost-cutting stabilized
41:13debt, compared to only 49%of those
41:15based on revenue increases. These
41:20initial cuts must be accompanied by a
41:22new fiscal rule, taking into account
41:24the lessons learned from the failures
41:25of the spending cap and the new fiscal
41:27framework. This new rule needs to be
41:31anchored to a target debt level based
41:33on three characteristics. Simplicity
41:36with observable parameters,
41:37predictability with few exceptions, and
41:40enforceability with automatic
41:41correction mechanisms in case of
41:43non-compliance. Starting with the new
41:47fiscal rule, we can signal long-term
41:49predictability to local and
41:51international markets, bringing
41:52investment to the Brazilian economy.
41:56This passage here about the new fiscal
41:59rule is great for you to understand
42:01once and for all what the core of my
42:04criticism is, because what do they
42:06conclude? That the key point of
42:10financial imbalance is primary spending
42:12. That is exactly what they are saying
42:15here. Everything we have seen so far is
42:19about this, about primary spending. So,
42:23even if you are a big fan of Renan
42:25Santos, you have to admit that in the
42:27entire project, at least so far, the
42:30financial structure of the Brazilian
42:32economy is treated as a passive object.
42:35This here is absolutely fundamental.
42:38The yellow book does not propose any
42:40financial reform. It proposes no reform
42:44regarding monetary policy because,
42:46according to the logic they are
42:48presenting, there is no need to do
42:50anything, because all of that responds
42:53passively to primary spending. So you
42:57tweak the primary, and naturally, you
42:59stabilize everything else. And look,
43:02folks, this is not technical, okay?
43:04This is not technical; this is a
43:07political choice. Because proposing to
43:11reform the financial structure of our
43:13economy means picking a monstrous fight
43:16with the financial market itself, which
43:18is effectively who commands the conduct
43:21of economic policy in Brazil. So much
43:25so that the diagnosis in the yellow
43:27book is based on the financial market.
43:30The only reference name used so far has
43:33been that of a banker. Of a banker. So
43:36what do you do? You tinker with
43:39expenses, practice austerity, because
43:42even though it's absolutely unpopular,
43:44it will only affect the most
43:46disorganized sectors of society. And
43:50you have to remember that Brazilians,
43:52unfortunately, have short memories,
43:53right? You give a shock to the public
43:56at the start of your term, and by the
43:58election, you fool people again with
44:00the bare minimum and even win the vote.
44:04People vote for you even though you
44:06hurt them, and they simply forget, okay
44:08? This goes from the left all the way
44:10to the right. Just look at the Workers'
44:13Party and their supporters campaigning
44:14for Tebet after she gave that little
44:15speech and voted for Dilma's
44:16impeachment. So, Brazilians have short
44:19memories regardless of their political
44:22ideology, okay? And so you don't say
44:25that I'm only criticizing, you know, up
44:27to now, that I haven't presented any
44:29solutions, you know, that I haven't
44:31presented any proposals, any
44:33counter-proposals, okay? One proposal I
44:37can bring is that the first measure for
44:40us to think about development is to
44:42redefine the very concept of fiscal
44:44responsibility, which is quite
44:47different from what the MBL is
44:49defending here. Because today in Brazil
44:53, this so-called fiscal responsibility
44:56is about chasing budgetary balance
44:58while completely ignoring the
45:00conditions of the real economy. It's
45:03not for nothing that the chapter is
45:05titled "bitter medicine." Why? Because
45:07for you to reach this budget balance,
45:09millions of people are going to have to
45:11suffer. Will the elite of the "Mission"
45:14party suffer from this when they
45:16de-index benefits? Will Renan Santos
45:18suffer from this? I don't think so,
45:19right? The economists and the bunch of
45:22Faria Lima investors who live off
45:24speculative gains in the financial
45:25market, will they suffer from this? No,
45:29right? No, no, no. And it's going to be
45:32more or less like it was with Milei in
45:34Argentina. They will freeze the real
45:37growth of people's income. Aggregate
45:41consumption will plummet, especially
45:43since you will also end the salary
45:46bonus, so these people's lives will get
45:49worse and inflation will drop due to
45:52the contraction in consumption. Because
45:56that's it, people going hungry helps to
45:58lower inflation. Except that at the end
46:01of the annual report, the MBL will be
46:03able to publish that they successfully
46:05practiced a surplus and that inflation
46:06remained within the established target.
46:10So, how could we redefine, for example,
46:13the concept of fiscal responsibility,
46:16while considering the real limits of
46:18economic activity for this concept?
46:22That is what should be done, consider
46:25real limits to determine what is or
46:28isn't fiscal responsibility, instead of
46:31focusing on institutional limits, which
46:34are arbitrary and artificial, okay? To
46:37start, money is endogenous, folks.
46:40Endogenous money, meaning its supply
46:43responds to the demand that exists in
46:45the real economy, such as the demand
46:48for credit. Money being endogenous also
46:52means it isn't neutral, because it can
46:54influence production, employment, and
46:57aggregate demand itself, both in the
46:59short, medium, and long term. And in
47:04this case, the endogenous money theory
47:06fully applies to Brazil, because we
47:09have monetary sovereignty, meaning we
47:11have full control over the issuance of
47:14our currency. Look, I am not advocating
47:18for expanding the money supply left and
47:20right, especially in this current
47:22economic model. What I am doing for you
47:25is explaining concretely what our
47:28monetary condition is in light of
47:30monetary theory itself, because this
47:32needs to be taken into account when
47:34thinking about any kind of reform or
47:36plan; otherwise, soon enough, we will
47:38be wanting to formulate economic policy
47:41based on quantity theory, okay? Besides
47:45, endogenous money does not exclude
47:48liquidity traps. That's already in
47:51Keynes, alright? Read it. Read, read,
47:54read here, look, the General Theory,
47:56okay? He talks about liquidity traps
47:58here in theory, in the General Theory,
48:00alright? It’s right here. So, it is
48:04evident that the real economy has
48:06limits, okay? Don't get me wrong. It is
48:09evident that it has limits. Inflation,
48:12for example, is one of those limits,
48:13because any economic arrangement needs
48:15to take price stability into account.
48:19Another limit of the real economy is
48:21the external constraint. Especially
48:24because we are not the issuers of the
48:25international reserve currency, at
48:27least not the main one. Another limit,
48:31a third limit, is the domestic
48:33production capacity we have, because
48:36labor force, resources, and machines
48:38are naturally limited. A fourth limit
48:43of the real economy, we could say, is
48:45investments themselves, okay? And the
48:48quality of these investments, since
48:51they are made possible by a series of
48:53circumstances and expectations that
48:55absolutely no one is capable of
48:57predicting or much less controlling, at
49:00least not directly, not even the
49:02government, okay? And only then, with
49:07these limits well-established regarding
49:10what the real economy is, fiscal
49:12responsibility must take them into
49:14account to formulate any strategy. But
49:19the strategy, okay, of you taking into
49:21account the real economy and its limits
49:24, right? is that the strategy must
49:28always be subordinate to economic
49:31growth. Never the other way around.
49:33Never the other way around. And I am
49:36citing these limits because, otherwise,
49:38in a little while, right, you will
49:40start with a bunch of straw men: you
49:42will say that I want to turn on the
49:44printing press, that we, the labor
49:46supporters, we, the developmentalists,
49:48do not worry about inflation, that we
49:50do not worry about debt and so on and
49:52so forth, okay? Listen, folks, that is
49:55not true. I am not here proposing
49:58unmeasured irresponsibility, okay? I am
50:02proposing another path for us to think
50:04about development, considering that
50:05this path will also have its limits,
50:07right? Now, what the MBL is presenting
50:11here is absolutely the opposite of what
50:13I am saying. They are defending fiscal
50:16responsibility, okay? Which is clearly
50:20based on institutional limits, okay?
50:24and that all these limits must be
50:27applied to the government's primary
50:29budget and then everything else will be
50:32subordinate to that, all right? This is
50:36the crucial point of the equation of
50:38the proposal that the MBL is presenting
50:41. And so, this discussion about
50:43thinking of a new concept of fiscal
50:45responsibility is not just my opinion,
50:48no, okay? So, I will show a lot of
50:51material for you, man, because André
50:54Lara Rezende himself, who is one of the
50:56fathers of the Real Plan, also defends
50:59this that I am proposing, that I am
51:01talking about, all right? Read this
51:04little book of his, *Ideological
51:06Straitjacket: The Crisis of Brazilian
51:08Macroeconomics*, okay? Read this book
51:11because it is very good and he also
51:12debates what I am debating, only in a
51:14much more sophisticated and qualified
51:16way, because, well, it's André Lara
51:18Rezende, okay? And so, a second
51:21proposal that I bring here and that the
51:24MBL does not even propose is to reform
51:27the structure of public debt. Pay
51:29attention to this. Pay attention.
51:34Thinking about Brazil's development
51:37involves reforming the structure of our
51:40debt. The MBL doesn't say a word about
51:44this, not here nor in the other
51:46fascicles, all right? And what would
51:49this reform be like? Starting with the
51:53extinction of Treasury Financial Bills,
51:55which are the post-fixed bonds that are
51:57indexed to the SELIC rate. Today, more
52:01than 50%of our debt is linked to these
52:04bonds. And what is the problem with
52:07that? It is that any increase in the
52:10Selic rate immediately affects most of
52:13the debt stock and consequently impacts
52:16the government's own budget. Don't
52:19forget, okay? This is a well-known
52:21piece of information. Each 1%increase
52:24in the interest rate generates an
52:26impact of about 50 billion on the
52:28government's financial budget. And so,
52:31just to be clear, okay? Defending the
52:34extinction of these bonds, as I am
52:36defending, is to argue that they should
52:38no longer be issued. I am not saying we
52:41should default on the bonds that
52:42already exist, that are already in
52:44force. I am not advocating for a
52:46default on public debt, okay? If we
52:49stopped issuing financial bills today,
52:51in about 6 years, their stock would be
52:54completely cleared, and that would
52:57greatly improve the efficiency of
52:59monetary policy. Look, nothing the MBL
53:02has addressed so far improves the
53:04efficiency of monetary policy. Nothing
53:06is linked to it. As I said, they treat
53:10the primary budget issue as the central
53:12thing, while the financial structure,
53:15monetary policy, central bank, etc.,
53:17would all be liabilities that respond
53:19to primary spending. Guys, this is
53:23terrible. This is a bad theory, okay?
53:28Is there any proposal from the MBL to
53:30debate what I am bringing up? No. It is
53:34as if these problems simply didn't
53:36exist, okay? Besides, public debt
53:41reform needs to be linked to a new
53:43pension reform. No, not a pension
53:47reform to strip away rights, like the
53:49one in 2019, okay? Which the MBL even
53:52defended, right? They defended one and
53:53are now saying it needs to be reformed
53:55again, right? I am advocating here for
53:58a reform that helps modify the profile
54:01of our debt, okay? Without ending
54:04anyone's retirement. I'm talking about
54:06a reform to link it to the financial
54:08system. So, very briefly, and because I
54:12already have a video here on the
54:14channel just about this subject, I
54:16defend a mixed pension model that
54:18combines the pay-as-you-go system with
54:21a mandatory capitalization model, where
54:24part of the revenue would be invested
54:26exclusively in long-term National
54:28Treasury bonds, okay? And then these
54:31bonds can have their yield rates
54:33indexed, for example, to the structural
54:36growth of the real economy, right? Or
54:39to indices like labor productivity or
54:42any other, okay? That is sustained in
54:46the long term so you can preserve the
54:48profitability of the bonds without
54:50causing a financial shock in the future
54:53or a default, okay? And so, by
54:56receiving a growing volume of long-term
54:59pension investments, the Treasury will
55:01have the capacity to lengthen its debt
55:04profile and will also meet, at least in
55:07part, its need to attract buyers, since
55:09, with this reform, investments in
55:11bonds will become certain and
55:13predictable, okay? This would indeed
55:18create the perfect condition, you know,
55:21for a sustained drop in interest rates,
55:24not by a stroke of a pen, as many
55:27people say we would like to do, but
55:29rather due to this concrete change in
55:32the demand for bonds. And even in
55:36moments when the Selic rate might
55:38eventually rise again, the government's
55:41budget would not suffer an immediate
55:43impact, right? absurdly improving the
55:46predictability of the trajectories of
55:48public accounts. This would truly be a
55:52real reform that would stabilize debt
55:55and open fiscal space for the
55:56government to allocate funds to
55:59investments rather than to excessive
56:01interest spending. And look, all of
56:05this without needing to attack the BPC,
56:07without needing to attack social
56:09security, or without needing to attack
56:11anything else, except for financial
56:12interests themselves, okay? And so,
56:17following in this direction, my third
56:19proposal, which also has a full video
56:22here on the channel, talking entirely
56:24about it, would be the reform of the
56:27macroeconomic tripod itself, starting
56:29with the nominal anchor, which today is
56:32not compatible with our economy's
56:34dynamics, because the 3%inflation
56:36target is excessively low, guys. It is
56:40excessively low, and this causes
56:42inflation to always be near the
56:44tolerance limit. There is no such thing
56:48as a 3%inflation target for an economy
56:52that has averaged over 6%in the last 25
56:55years. The nominal anchor needs to be
57:00adapted to our needs, and not the other
57:03way around. Guys, I keep repeating that
57:07a target between 4%and 6.6%would be
57:11ideal. Besides that, I also advocate a
57:15change in exchange rate policy, because
57:17if you want to industrialize the
57:19country, you need to manage the
57:20exchange rate, okay? You have to manage
57:24it so that, to some extent, it is a
57:26minimally competitive exchange rate.
57:29And evidently, I also advocate the end
57:31of the primary surplus target, right? I
57:35advocate that the target should become
57:37the structural current result of the
57:40economy, with investment expenses not
57:42being part of this result target.
57:45Because today, with the primary surplus
57:47rule, you have a pro-cyclical
57:49management of the economy. If by chance
57:52revenues rise due to non-recurring
57:55events, like privatization, this enters
57:57the surplus account and becomes a
57:59perverse incentive for any government
58:02to often make misguided decisions,
58:04because they are aiming to improve, you
58:07know, the government's short-term
58:09result, right? But at the same time,
58:13these decisions deteriorate the medium
58:15and long-term economic conditions. But
58:18then the person does this, they go and
58:20privatize a company just to have a
58:21positive balance later on, okay? Or
58:24worse, right, when you have a crisis,
58:26that’s when things escalate, because
58:28government revenues fall, right? And
58:32for you to be able to produce a surplus
58:34, you have to reduce as much as
58:36possible, okay? Expenses. In other
58:39words, right? And sometimes you don't
58:41even manage, you know, to produce the
58:42surplus and then you try, you know, to
58:44reduce the deficit level as much as
58:46possible, and you end up trimming the
58:48machine, okay? And this ends up
58:50deepening the recession. That was
58:51exactly the case with the Dilma
58:52administration, right? It was by
58:54trimming the machine that the recession
58:56worsened during a crisis. You don't
58:58implement a pro-cyclical fiscal policy;
59:01you implement an anti-cyclical fiscal
59:03policy, okay? Besides, this search for
59:07a surplus also becomes the perfect
59:09incentive for adjustments to come in
59:12the form of taxes, right? Isn't that
59:16what Lula has been doing? Trying to
59:18reach a surplus, trying to decrease the
59:20deficit, right? He just keeps imposing
59:23taxes. There's nowhere left to get
59:25taxes from, but he keeps pushing them.
59:27Okay? Now, if you consider the
59:31structural result, as I am advocating,
59:33this will mean that neither
59:35extraordinary revenues nor
59:37extraordinary expenses will enter the
59:39current result. In other words, the
59:43expected result when expenses and
59:45revenues follow their normal trajectory
59:48, understand? I'm saying to take these
59:50extraordinary things and put them aside
59:52, okay? And leave only the structural
59:54result as what matters, because it's
59:56clear, right? And then have investment
59:59also kept separate from this result,
1:00:02precisely so that investment is
1:00:03shielded from cuts. Because when we
1:00:07talk about cutting spending, it is
1:00:09evident that investment will always be
1:00:11one of the first options. So, if you
1:00:14want to create a railroad project, for
1:00:16example, it will need to be constantly
1:00:19funded for at least, I don't know, a
1:00:21decade, at least 10 years, okay? You
1:00:24can't have investment that needs to be
1:00:27long-term tied to an annual balance
1:00:30sheet or even the balance of a
1:00:32presidential term, because then the
1:00:35government changes and the new
1:00:37government goes in and freezes
1:00:39investment to meet a fiscal target, to
1:00:42help with adjustments, you know? And
1:00:45investment should be shielded. So that
1:00:50remains separate from the main budget.
1:00:54Only then, with all of this, would we
1:00:56be talking about a true reform that
1:00:58effectively targets growth and that
1:01:00preserves people's income. That's just
1:01:04to start, okay? Just to start. So, you
1:01:08who are enthusiasts of the Missão
1:01:11party, see that I am at this moment
1:01:14defending this clearly, okay? I am
1:01:18demonstrating clearly to you that the
1:01:21path to develop Brazil is another one.
1:01:26The path to develop Brazil is not this
1:01:29one being presented in the yellow book.
1:01:32Of course, you can compare and see what
1:01:35makes more sense or not, okay? But it
1:01:39is important that you at least
1:01:41understand, that you become aware that
1:01:43there are other ways of doing things.
1:01:47And these ways are not even cited by
1:01:50this project here, okay? This project
1:01:54here is very well-defined; it is closed
1:01:56within its own logic that ignores all
1:01:58others. So you need to know the other
1:02:02proposals, the other perspectives,
1:02:04right? Because one thing I see a lot
1:02:07from Missão supporters saying is: "
1:02:09Look, the MBL, Missão, and Renan are
1:02:11the only candidates for President of
1:02:13the Republic who effectively carried
1:02:15out a research project to develop a
1:02:17plan, right?" They conducted a very
1:02:20broad research process to create all
1:02:22the booklets in the yellow book, while
1:02:23the other candidates did nothing. Look,
1:02:27the MBL being the only one in the
1:02:29presidential race to have done this
1:02:32does not make the plan good, okay? It
1:02:36does not make the plan good. So, so, so
1:02:38get to know the various options, study
1:02:41more, do more research before going out
1:02:44and embracing anything just because it
1:02:47supposedly seems like a novelty, okay?
1:02:50Because it isn't. And continuing here,
1:02:54the de-indexing of expenses from the
1:02:57minimum wage. In the federal budget,
1:03:00there are four major expenses indexed
1:03:02to the minimum wage: social security
1:03:04benefits, continuous cash benefits,
1:03:07unemployment insurance, and the wage
1:03:09bonus. By indexing them, the country is
1:03:13forced to limit the real growth of the
1:03:15minimum wage to prevent the growth of
1:03:17public spending. It seems like this
1:03:21makes sense, but it doesn't, okay? And
1:03:25you don't even need to be a
1:03:26developmentalist to test this. What
1:03:29limits the real growth of the minimum
1:03:31wage is not the trajectory of primary
1:03:33spending. What limits this growth is
1:03:37labor productivity. Remember when I
1:03:39talked about the Dilma crisis? One of
1:03:41the factors that contributed to the
1:03:43drop in gross fixed capital formation
1:03:45was precisely the rise in wages above
1:03:47labor productivity during the Workers '
1:03:48Party administrations. Especially
1:03:51because a real increase in the minimum
1:03:53wage primarily impacts the costs of the
1:03:55private sector itself. In other words,
1:03:58Renan might even be able to de-index
1:04:00benefits, right? And it could still
1:04:04happen that the minimum wage remains
1:04:07stagnant, okay? Instead of growing. And
1:04:11do you know why I tell you that this is
1:04:13what will most likely happen? I say
1:04:18this because fiscal adjustment will
1:04:20cool down demand over time, okay? This
1:04:24adjustment will cause this cooling of
1:04:27demand, since people will stop
1:04:29receiving real increases in their
1:04:31benefits, and this will limit
1:04:33productive performance itself, which in
1:04:36turn will also limit the real growth of
1:04:39wages, okay? So, it seems to make sense
1:04:42, but it doesn't make sense, okay? He
1:04:45can de-index everything and wages can
1:04:47still remain stagnant in real terms,
1:04:50okay? And they will remain so. To make
1:04:54matters worse, the two largest indexed
1:04:56expenses, Social Security and the BPC,
1:04:59are sensitive to demographic variations
1:05:02and population aging. Indexation
1:05:05creates a direct link between public
1:05:08spending and this population variation.
1:05:11These mandatory expenses further reduce
1:05:14the space for discretionary spending,
1:05:16removing the executive branch's
1:05:18budgetary flexibility. The outlook is
1:05:22frightening. According to the bill for
1:05:24the, the outlook is frightening.
1:05:27According to the project for the 2025
1:05:30Budget Guidelines Law, for every R $ 1
1:05:33increase in the minimum wage, the
1:05:35Union's mandatory primary expenses
1:05:38increase by R $ 429 million.
1:05:42De-indexing the two largest expenses
1:05:44from the minimum wage would result in a
1:05:47PEC, a potential savings of 1.1
1:05:49trillion over 10 years. That is what
1:05:52the fiscal balance amendment (PEC)
1:05:54already filed proposes. Furthermore,
1:05:58with de-indexation, it would be
1:06:00possible to increase the minimum wage
1:06:02without impacting the budget,
1:06:04potentially increasing the income of
1:06:07workers in the formal market. Well,
1:06:11this here, as I said, is unlikely to
1:06:13happen, okay? Given that wages would
1:06:17only have significant gains in this
1:06:19period if labor productivity grew
1:06:22consistently, but due to the project
1:06:25itself, it is highly unlikely that this
1:06:28will happen, okay? Because they are
1:06:32trying to replicate, more rigidly, the
1:06:36model that has been used in Brazil
1:06:39since the 90s and which keeps us
1:06:42stagnant. Okay? And regarding mandatory
1:06:46expenses compressing discretionary ones
1:06:48, the solution is what I've already
1:06:50proposed to you, okay? You change the
1:06:54fiscal rule and remove non-recurring
1:06:57expenses and investments from the
1:06:59balance sheet, because then those items
1:07:02will stop competing for space in the
1:07:04budget, all right? And naturally, you
1:07:08will decompress it. But Charlie, where
1:07:11will the resources come from, right,
1:07:13for the investment, for this investment
1:07:15that will be separated, where will
1:07:16these resources come from? I tell you,
1:07:20these resources will come from debt,
1:07:22okay? Because, theoretically, the
1:07:27function of debt in capitalism should
1:07:30be its use for productive investment,
1:07:33okay? That should be the function of
1:07:38debt, to sustain productive investments
1:07:40. The problem is that today, in the
1:07:43tripod model that this little book here
1:07:45is defending, right? They defend the
1:07:48tripod, they don't want to change it,
1:07:50and the government keeps taking on debt
1:07:52just to roll over its own debt. And
1:07:54that is crazy, man. This is
1:07:56unacceptable. So, the function of debt,
1:07:59which should be to invest, which should
1:08:01be development, becomes just a function
1:08:03of profitability for the financial
1:08:04market itself. That's basically the
1:08:07only reason debt exists. Okay? And what
1:08:10would be the correct approach? Right?
1:08:13By applying the proposals I brought,
1:08:15which I am bringing now, not these ones
1:08:17from the MBL, you would have a
1:08:19structural reduction in interest rates
1:08:21and growth driven by state investment.
1:08:26So, with the real interest rate being
1:08:28lower than GDP growth, automatically,
1:08:30the cost of carrying the debt would
1:08:33fall and become stable, okay? In this
1:08:37little book by Lara Rezende that I
1:08:38recommended to you, he also talks about
1:08:40this. So the state would take on debt,
1:08:45right, to make investments, and the
1:08:48interest costs, as they wouldn't be
1:08:50excessive, wouldn't blow up the debt
1:08:53trajectory itself, okay? Precisely
1:08:57because there would be low interest
1:08:59rates with growth driven by these
1:09:00investments and by the increase in tax
1:09:02revenue itself, right? Where along with
1:09:05investment and economic growth, you
1:09:07also increase the government budget
1:09:09through tax collection. And often you
1:09:12can even reduce taxes and still
1:09:14guarantee an increase in that revenue.
1:09:18Of course, this is considering a
1:09:20scenario where these investments will
1:09:22be efficient, okay? Where these
1:09:26investments will effectively generate
1:09:28innovation, technology, sophistication,
1:09:31and so on. Okay? If the investment
1:09:34isn't good, it's no use at all. They
1:09:36have to be good investments. Delinking
1:09:40revenues and expenses. There are five
1:09:43federal primary expenses linked to the
1:09:45performance of public revenues.
1:09:47Healthcare floor, education floor. It
1:09:50complements the fund for the
1:09:51maintenance and development of basic
1:09:53education and the appreciation of
1:09:54education professionals, FUNDEB,
1:09:56mandatory amendments, and the Federal
1:09:58District's constitutional fund. Such
1:10:01linkages between revenues and
1:10:03expenditures should be avoided due to
1:10:05certain economic principles. They are
1:10:08procyclical expenditures, as they
1:10:09depend on the performance of economic
1:10:11activity. On the contrary, the ideal is
1:10:14for public spending to be
1:10:15countercyclical to reduce the impact of
1:10:18recessions. Look, here they reach a
1:10:22conclusion that is quite similar to
1:10:25mine. Public spending, especially in
1:10:27recessions, really needs to be
1:10:29countercyclical. However, their
1:10:32proposal is the delinking of these
1:10:35floors, okay? Whereas mine is a change
1:10:38in the nature of the structural result,
1:10:40as I have already explained. And the
1:10:43advantage of my proposal is that you
1:10:45don't run the risk of undermining
1:10:47health and education as they are
1:10:49proposing here, okay? Because the risk
1:10:51of this proposal here is just that. And
1:10:56they continue: these are inefficient
1:10:58allocations occurring automatically,
1:11:00without justification from sectoral
1:11:02diagnoses or long-term planning. They
1:11:07harm fiscal balance, as increases in
1:11:09revenue result in automatic increases
1:11:12in public spending, making it difficult
1:11:14to achieve a surplus. Man, this
1:11:19argument here in this second topic
1:11:21makes no sense to me at all, honestly,
1:11:24it makes no sense. The linkage
1:11:27establishes a minimum level of
1:11:30investment, okay? But it doesn't
1:11:34automatically follow that the spending
1:11:36will be random or unplanned, because
1:11:39what they are implying here is that the
1:11:42floor would be the cause of
1:11:44dysfunctional spending. And, well, that
1:11:47doesn't seem correct to me, okay? It
1:11:50doesn't seem right; I don't know if
1:11:51they will develop this explanation
1:11:53better later, but this doesn't make
1:11:55sense to me. It is evident that our
1:11:58problems with education and health go
1:12:01beyond a lack of investment, okay? We
1:12:06also have problems due to the lack of
1:12:08quality in spending, right? The poor
1:12:11quality of spending, the poor quality
1:12:13of management in various sectors. I am
1:12:17not ignoring that these are problems;
1:12:18they are problems that go beyond the
1:12:20inefficiency of public investment, okay
1:12:21? I will not deny this in any way, but
1:12:26there is no contradiction between
1:12:28maintaining the floor and improving the
1:12:31use of resources. You can carry out an
1:12:36administrative reform, you can improve
1:12:38spending planning, and you can still
1:12:40have the floor, okay? And since this
1:12:45isn't well-elaborated in the book, I
1:12:46will even give it the benefit of the
1:12:48doubt, okay? Because who knows, maybe
1:12:51there's some rule. related to the floor
1:12:54that I'm not aware of, okay? But even
1:12:57so, change the rule and not the floor.
1:13:01And so, what I actually think here,
1:13:04based on what they are saying here, is
1:13:08that the goal of decoupling is mainly
1:13:11about this third item, okay? you
1:13:16decouple the floors and gain room in
1:13:19the budget to guarantee a primary
1:13:22surplus. And there were even supporters
1:13:25of the Mission there, of the Mission,
1:13:27saying that the Mission didn't support
1:13:29the surplus, that they just wanted to
1:13:31change the policy, but that they didn't
1:13:33defend the surplus. It's right here,
1:13:35look. It's right here, look, hindering
1:13:37the pursuit of the surplus. They didn't
1:13:40oppose it, you understand? They are
1:13:41saying what you should resolve to
1:13:43pursue it more easily. And then it
1:13:45continues here. For these reasons, the
1:13:47ideal would be the decoupling of the
1:13:49three largest expenses: the floor for
1:13:51health, education, and the FUNDEB
1:13:53supplement. According to the CDP study,
1:13:56the decoupling would result in savings
1:13:58of 800 billion over 10 years. In the
1:14:02particular case of amendments, the
1:14:04ideal is to define them as a percentage
1:14:07of discretionary expenses instead of
1:14:09total revenue. The change would create
1:14:14an incentive system in which the
1:14:16National Congress would have an
1:14:18incentive to control the growth of
1:14:21mandatory expenses to maximize budget
1:14:23space. Man, like, regarding amendments,
1:14:27my position is actually quite simple,
1:14:29okay? Either you end them for good, I
1:14:32don't think that's possible, or you end
1:14:35their mandatory nature, okay? Because
1:14:38unlike the puritans, today I understand
1:14:40that amendments should be a bargaining
1:14:42tool for the federal executive branch.
1:14:46Because if tomorrow a government comes
1:14:48in willing to carry out a project, this
1:14:51government must have tools to be able
1:14:53to bend Congress, because today what
1:14:55happens is the opposite, it's Congress
1:14:58that bends the executive, okay? And a
1:15:02shift, okay, in this force, of this
1:15:04flow of forces, could be a change in
1:15:07the amendments, right, making it so
1:15:09that the amendments are no longer
1:15:11mandatory. And then follows the
1:15:14rationalization of the financial
1:15:16surplus. The Union possesses a high
1:15:19financial surplus. However, this
1:15:21surplus is linked to sources that have
1:15:24no execution, no budget execution, or
1:15:26belong to inoperative funds, such as
1:15:28the social fund or the Merchant Marine
1:15:31fund. This means in practice that the
1:15:35government keeps 500 billion in idle
1:15:37resources tied up by legal shackles,
1:15:39while paradoxically issuing public debt
1:15:41to finance its deficits. The solution
1:15:44to this problem is simple. Automatic
1:15:47and unrestricted decoupling of
1:15:49resources not executed by the end of
1:15:51the fiscal year. This measure does not
1:15:55relax current fiscal rules, but
1:15:57improves the management of resources
1:16:00subject to these rules. As a
1:16:04consequence, we expect a reduction in
1:16:06the cost of debt, since transforming
1:16:08these idle resources into free funds
1:16:10would reinforce the debt buffer,
1:16:12lowering rollover risks and helping to
1:16:14reduce the economy's structural
1:16:16interest rates. Furthermore, there
1:16:20would be an improvement in budgetary
1:16:23allocation, reducing budget rigidity
1:16:25and allowing resources to reflect the
1:16:27country's real priorities. This change
1:16:32would also play a role in breaking the
1:16:34current model of fiscal territories
1:16:36within the treasury account, combating
1:16:39the patrimonialist management of
1:16:41revenues. Finally, it would
1:16:44disincentivize the creation of new
1:16:47earmarks and stimulate a critical
1:16:49evaluation of funds that accumulate
1:16:51money without generating effective
1:16:54public policies. In total, the
1:16:58implementation of these unlinking
1:17:00measures would amount to immediately
1:17:02releasing 500 billion, corresponding to
1:17:0861%of the public debt buffer,
1:17:10increasing the state's investment
1:17:13capacity and lowering interest rates.
1:17:18This proposal here is basically good,
1:17:20you know? But I have a few reservations
1:17:22. First, could this help in avoiding a
1:17:27debt refinancing? Yes, but for there to
1:17:31be a sustained drop in interest rates,
1:17:33you would need more than this. This is
1:17:37insufficient, okay? If you don't reform
1:17:42the debt structure, like I am proposing
1:17:44, this here will probably make little
1:17:47difference, okay? For lowering interest
1:17:50rates. This could be added. To the
1:17:53proposal I am giving, okay? To
1:17:55restructure the debt, okay? To
1:17:57reformulate, then it would work. But
1:18:00even so, for what exists today, I
1:18:03already consider this interesting, okay
1:18:07? This could indeed improve something.
1:18:11Now, my second point is even more
1:18:14important, okay? Which is with this
1:18:17statement here that they mention above,
1:18:18look. Automatic and unrestricted
1:18:21unlinking of resources not executed by
1:18:24the end of the fiscal year. In other
1:18:28words, for example, if there were 100
1:18:30billion allocated to a sector and that
1:18:33sector only spent 70 billion, the 30
1:18:35billion left over would be free for the
1:18:38government to use for something else.
1:18:41Cool, that is interesting. But wouldn't
1:18:45this create a perverse incentive for
1:18:47sectors to spend all the money just so
1:18:50they don't lose it, because that could
1:18:53actually worsen the quality of spending
1:18:56, right? They would think like: "Ah,
1:18:59since the government is going to take
1:19:00that money at the end of the period,
1:19:02let's just spend it on whatever we can,
1:19:03guys." Let's spend it because we don't
1:19:07want to lose these funds, you know?
1:19:10That, that could actually happen,
1:19:12considering what they are putting here,
1:19:13this really could happen. So, it's a
1:19:16good idea, it's interesting, but I
1:19:19think we have to think carefully about
1:19:21how to calibrate this rule to prevent
1:19:23that from happening, so it wouldn't
1:19:26have the opposite effect, right?
1:19:29Instead of having a fund, you'd end up
1:19:31with no fund, because they would just
1:19:33blow it all away so the money wouldn't
1:19:34go to other departments, because you
1:19:36know there is a dispute within the
1:19:38budget and competition between sectors
1:19:39for this budget, right? But, in general
1:19:43, I thought this part here was quite
1:19:46good, okay? Really cool. And then, look
1:19:48, here they go on to talk about civil
1:19:50service reform. I don't think it's the
1:19:53right time for us to have this debate.
1:19:55I don't think it fits as much into this
1:19:57debate we're having here about the
1:19:59conduct of economic policy,
1:20:00macroeconomic policy, mainly, okay? But
1:20:02look, just very quickly, civil service
1:20:05reform, planning and careers, okay? I'm
1:20:07not against it. Evaluation and
1:20:09incentives, I'm also not against it.
1:20:11Training and development, evidently,
1:20:13I'm not against it. Transparency and
1:20:16rationality, man, I'm not against it,
1:20:17you know? I know they advocate for
1:20:20ending some job security, etc. No, I
1:20:22disagree with that, but I think this is
1:20:24not the discussion for right now. I
1:20:28could have this discussion in another
1:20:30video specifically covering this, okay?
1:20:33Then they talk here about ending
1:20:35excessive salaries in the public sector
1:20:37. Evidently, I fully agree, right?
1:20:41Fully, as far as I'm concerned, reduce
1:20:43the excessive salaries yesterday,
1:20:45reduce privileges, okay? For me, this
1:20:48point is settled. Fiscal discipline for
1:20:52states and municipalities. This is a
1:20:55very interesting debate that needs to
1:20:57happen, okay? But I consider this a
1:21:00debate that we can also have at another
1:21:02time, talk only about that, especially
1:21:04because the dynamics of the economy,
1:21:06you know, when we deal with states and
1:21:07municipalities, it changes a bit. And
1:21:10here I am focused much more on the
1:21:12dynamics of the economy from the
1:21:14federal point of view, okay? From the
1:21:17point of view of fiscal conduct and
1:21:20mainly monetary conduct, okay? Or
1:21:23rather, both, both, right? No, not
1:21:25mainly, it's both, right? So, it's also
1:21:28so we don't drag this out any further,
1:21:30okay? I'll leave this here for us to
1:21:32debate another time, not least because
1:21:34it doesn't change much regarding the
1:21:35criticisms I made of the rest of the
1:21:36program, okay? I'm not leaving anything
1:21:39of great importance out. Uh, next here
1:21:42they will talk about parliamentary
1:21:44amendments. I’ve already given my
1:21:46opinion, right? I am in favor of
1:21:48amendments being used to increase the
1:21:50government's bargaining power. Eh, I
1:21:53imagine that here they shouldn't
1:21:55propose anything too absurd, especially
1:21:56because as far as I know, the MBL is
1:21:58very critical, right, of parliamentary
1:22:00amendments, okay? So, I don't think
1:22:01there's any big debate for us to have
1:22:03here in principle. I could also address
1:22:05this at another time. FUNDEB, I believe
1:22:08there are people more competent to
1:22:10discuss FUNDEB and education from a
1:22:12technical point of view, okay, than I
1:22:14am. Someone like Crep, right, my friend
1:22:17Frederico Crep, a great labor supporter
1:22:19, he who is also a teacher, right, who
1:22:21is in the classroom, who understands a
1:22:22lot about all of this. He would
1:22:24certainly be much better to debate this
1:22:26. So, I’m going to skip this one too,
1:22:29okay? New supplementary law on public
1:22:33finance. Here it is worth us looking
1:22:35into the chapter. Law 4320/64 was
1:22:40crucial for Brazil's financial health
1:22:42in its time. However, according to the
1:22:45analysis of economist Hélio Tolini, it
1:22:48is outdated today, 60 years after its
1:22:50ratification. It is necessary to
1:22:53institute a new legal framework
1:22:55regulating the public budget. To that
1:22:57end, some foundations are imperative.
1:23:01Public planning must be permanent, but
1:23:03flexible and focused on delivering
1:23:05results in economic, social, and
1:23:07environmental development. It must,
1:23:10therefore, be based on national,
1:23:12regional, and sectoral strategic plans
1:23:14and on public policies that have
1:23:16periodic performance evaluations.
1:23:19Interesting. In particular, the
1:23:21multi-year plan, today an inefficient
1:23:24model for long-term budget planning,
1:23:27would be replaced by the government
1:23:29plans provided for in article 84 in
1:23:34article 84 of the Constitution, which
1:23:37are sent by the president to the
1:23:39National Congress at the opening of the
1:23:41legislative session, to include budget
1:23:44planning. In this context, it would
1:23:46increase the executive's flexibility.
1:23:49The next change is to shift the focus
1:23:52of budget preparation from the short to
1:23:55the medium term, attaching a
1:23:58medium-term expenditure framework, MTEF
1:24:01, to the budget guidelines law. This
1:24:06MTEF, this medium-term expenditure
1:24:08framework, will allow for the
1:24:10allocation of resources for strategic
1:24:13priorities defined in advance,
1:24:14respecting limits compatible with
1:24:16fiscal targets, in line with the new
1:24:19fiscal rule to be approved in the
1:24:21transition amendment. For budget
1:24:24preparation, it is ideal to create a
1:24:27national investment system managed by a
1:24:29technical body. This idea is excellent.
1:24:33It might be the first great idea I've
1:24:35read so far. This idea is very good.
1:24:39Only projects previously analyzed and
1:24:42approved by this entity could be
1:24:44included in the budget, including even
1:24:46those indicated via parliamentary
1:24:49amendments. This system could be linked
1:24:53to the general commission described in
1:24:55chapter 4. Multi-year projects entered
1:25:00into this system would have their total
1:25:02cost authorized at once by the
1:25:04legislature. Once a project has started
1:25:08, its execution would be automatic and
1:25:10prioritized in subsequent budgets until
1:25:13at least one fully functional stage is
1:25:15completed. This is good. This is good,
1:25:18okay? Another important aspect is
1:25:21modernizing the budget guidelines law
1:25:24by setting spending limits for the
1:25:26legislature and the judiciary. Oh, this
1:25:30is also good, okay? It's good. They
1:25:32left the best for last, apparently. At
1:25:35the same time, the annual budget law
1:25:37needs to be more managerial and less
1:25:39cluttered with technical details. I
1:25:42agree. Transferring purely operational
1:25:45classifications to auxiliary databases
1:25:47with greater flexibility. Together for
1:25:51both cases, an effective cost system
1:25:53must be implemented, as well as
1:25:55convergence with international
1:25:57accounting standards applied to the
1:25:59public sector. A new rule for mandatory
1:26:03and systematic expenditure review and
1:26:06the requirement for a priori and a
1:26:08posteriori evaluation of public
1:26:10policies as an integral part of the
1:26:12budget cycle. Finally, the new
1:26:16Independent Fiscal Institution (IFI)
1:26:19would have its independence reinforced
1:26:22by being linked to Congress and not
1:26:25just the Senate. Among its new duties
1:26:29would be to technically verify the
1:26:31consistency of the fiscal and budgetary
1:26:34scenarios presented by the executive
1:26:37branch. Man, this is the best, this is
1:26:40the best part of this whole book, okay?
1:26:43But then, before I comment on these
1:26:45proposals, okay? Later, they talk here
1:26:47about tax expenditures, right? Which
1:26:49are tax incentives. And look, I also
1:26:51think a great debate will come out of
1:26:53this, especially because they are
1:26:55critical, right? Of the amount, right,
1:26:58of tax incentives we have. I am also
1:27:02very critical of this, so I think there
1:27:04is a little debate to be had, but it's
1:27:06not that important right now for the
1:27:08topic of this video, okay? For what I
1:27:11am focusing on here in this plan. I can
1:27:13later take these chapters—not
1:27:16chapters, right, these half-chapters
1:27:18that I didn't debate from the book—
1:27:21and address them in later videos, okay?
1:27:25But in principle, I don't think it's
1:27:26necessary, even so this video doesn't
1:27:28get any longer than it already is. All
1:27:30right? However, these proposals in this
1:27:33semi-chapter here, right, the new
1:27:36Supplementary Law on Public Finance,
1:27:39are interesting, okay? They are good.
1:27:43Starting with the replacement of the
1:27:45PPA, because if I haven't misunderstood
1:27:47, sending the government plan directly
1:27:50to the National Congress could help the
1:27:52executive branch have more control over
1:27:55the budget, okay? In principle, that's
1:27:58what I understood here, that they are
1:27:59trying to help the executive branch
1:28:01have more control over its budget and
1:28:03planning, okay? So this seems very good
1:28:06to me, because today the budget and
1:28:09planning are detached, right, from the
1:28:11executive, basically, with the National
1:28:14Congress having a lot of control over
1:28:16it. Creating a national investment
1:28:21system is an excellent idea; it's by
1:28:23far the best idea in this entire book,
1:28:26okay? And it fits perfectly with my
1:28:29proposal to keep investment separate
1:28:30from the general balance sheet, all
1:28:32right? You would have separate
1:28:35investment and you would also have a...
1:28:37it could be, I don't know, an agency, I
1:28:39don't know, a technical space with
1:28:41independence, right? With a certain
1:28:43independence—not independence, rather
1:28:45a certain autonomy from the government
1:28:47to be able to develop and think about
1:28:49public projects, okay? For...
1:28:51investments that would be beneficial in
1:28:54the long term, all right? Precisely so
1:28:56that there would be quality, right?
1:28:58Because as I said before, if there
1:29:00isn't quality in the investment, even
1:29:02the things I'm proposing won't be
1:29:03efficient, because at the end of the
1:29:05day, what drives development is, in
1:29:07fact, investment. The whole discussion
1:29:10here is about making investment viable,
1:29:11which is our problem today, right?
1:29:14Beyond the technical issue, the
1:29:16difficulty of creating new technologies
1:29:18, etc., we have the problem of managing
1:29:20to make the budget available to invest,
1:29:22right? That is the problem that must be
1:29:25solved first and foremost. Right?
1:29:28Limiting spending for the legislative
1:29:30and judicial branches, as far as I'm
1:29:32concerned, can be done yesterday, okay?
1:29:33I fully agree with that. Now that's a
1:29:36spending limit that would be beneficial
1:29:38, okay? You can limit spending for that
1:29:40. Now, my problem with this proposal is
1:29:45that it is a good proposal, okay? A
1:29:50good proposal for planning that, in the
1:29:53end, will be crushed by a general
1:29:55government plan that is openly
1:29:57neoliberal, by a government plan that,
1:30:00unfortunately, does not propose to
1:30:02break with the new macroeconomic
1:30:04consensus, but in fact reaffirms it.
1:30:09And just one more little piece of
1:30:10information so you can understand the
1:30:12reason for my enormous skepticism
1:30:13regarding this project. Between 1999
1:30:17and 2013, Brazil achieved consecutive
1:30:19primary surpluses and accumulated over
1:30:221 trillion reais from them. In that
1:30:26same period, the government spent over
1:30:284 trillion reais just on interest
1:30:30payments on the debt, without
1:30:31considering principal payments. In
1:30:34other words, the fiscal effort of
1:30:36surpluses was entirely absorbed by the
1:30:38government's financial expenditures.
1:30:40And keep in mind that we are talking
1:30:42about a period in which the debt-to-GDP
1:30:44ratio fell. But even with surpluses and
1:30:47a falling debt, interest rates remained
1:30:50constantly high, precisely because this
1:30:52relationship between the debt
1:30:54trajectory and interest rates is not
1:30:57mechanical, as this project here is
1:30:59suggesting. Interest rates in Brazil
1:31:03are high due to the structure and
1:31:04profile of the debt, which we have
1:31:06debated throughout this entire video,
1:31:08okay? A structure that Lula didn't even
1:31:11touch, even with the debt falling, okay
1:31:15? That is, in a period in which
1:31:18theoretically the reduction of the debt
1:31:20could have helped to make those reforms
1:31:23, you know? You would have perhaps had
1:31:26less resistance. Another absolutely
1:31:29fundamental thing that explains the
1:31:31persistence of high interest rates and
1:31:34which I have not yet commented on is
1:31:36the general indexation of contracts in
1:31:39the economy. And this has nothing to do
1:31:41with indexation of benefits, okay? We
1:31:43are talking about something else, don't
1:31:45get them confused. Because what happens
1:31:47in the Brazilian economy today? Various
1:31:51contracts, such as rental agreements,
1:31:53salary contracts, and contracts for
1:31:56administered prices, are contracts
1:31:58readjusted according to past inflation.
1:32:03And what does this do? It causes this
1:32:06readjustment to carry inflation from
1:32:08the past into the present. This causes
1:32:12what economists call inertial inflation
1:32:14, which was the big problem of the
1:32:17hyperinflationary crisis of the 80s
1:32:19here in Brazil. The Real Plan was a
1:32:23plan that, among other things,
1:32:25de-indexed our economy, and that was
1:32:27what helped in its success of
1:32:29stabilizing the currency. However, this
1:32:34stabilization process was not 100%
1:32:37completed, meaning part of the
1:32:39post-Real Plan economy remained indexed
1:32:42. So, today, part of our inflationary
1:32:46pressures stem from this inertia caused
1:32:49by indexed contracts. And this is a
1:32:52type of inflation that interest rates
1:32:54do not resolve. You can raise them as
1:32:57much as you want, okay? And inflation
1:33:00will still remain persistent, because
1:33:02interest rates at most attack inflation
1:33:04from the demand side. But in this case,
1:33:08we are not talking about demand-pull
1:33:09inflation. Do you understand? Besides
1:33:12the fact that part of the inflation
1:33:14also occurs due to supply shocks. For
1:33:16example, you have a drought or you have
1:33:19, I don't know, a bad harvest. And
1:33:21because of that, it's very common for
1:33:24prices to rise momentarily, right? Then
1:33:27, theoretically, when this abnormality
1:33:30passes, the trend is for prices to fall
1:33:33as well. But with contract indexing,
1:33:37the inflation from this shock, which
1:33:39would be short-lived, is taken into
1:33:42account when readjusting the contract.
1:33:45So what happens? The inflation, which
1:33:49would be temporary, is carried forward
1:33:51and becomes persistent inflation,
1:33:53causing the Central Bank to tighten
1:33:55monetary policy for longer. And then
1:33:58it's just interest rate hikes, interest
1:33:59rate hikes, interest rate hikes—just
1:34:01rising rates, right? So, to help reduce
1:34:04the SELIC rate efficiently, it would be
1:34:07necessary to de-index the economy in
1:34:10almost all sectors, perhaps with the
1:34:12exception of wages, okay? Perhaps wages
1:34:16, because that way you would reduce the
1:34:18inertial component, and that could give
1:34:20more efficiency to monetary policy. Did
1:34:24the MBL plan mention this at any point
1:34:26here? No, right? As we saw, no? So,
1:34:31what is my verdict regarding Renan
1:34:33Santos's economic plan? However
1:34:37well-intentioned and dedicated he may
1:34:39be, it starts from a completely
1:34:41mistaken diagnosis that has been shared
1:34:43by the economic mainstream for a long
1:34:45time. I can safely say that the main
1:34:50project of industrializing Brazil and
1:34:52making us the fifth-largest power on
1:34:55the planet will not be achieved with
1:34:57this economic plan. It won't. The only
1:35:01promise here, right, that they might
1:35:03achieve is the stabilization of public
1:35:06debt. Because really, if you trim the
1:35:08government machine and run constant
1:35:10surpluses, that halts its growth
1:35:12trajectory. But that doesn't mean
1:35:15interest rates will drop, okay? And in
1:35:18the end, the problem is interest rates,
1:35:20the interest rates; it always has been,
1:35:22right? And without the structural
1:35:24reforms I brought up here, this simply
1:35:27won't be resolved. Just look at the
1:35:29difference between what I brought you,
1:35:31explaining the cause of interest rates,
1:35:34and the assumption here in this
1:35:36government plan. The idea here is that
1:35:38interest rates are high today because
1:35:41the debt is on an unsustainable
1:35:42trajectory. So you reduce the debt
1:35:46trajectory, which naturally reduces
1:35:48interest rates, and with lower interest
1:35:50rates you will have room in the budget
1:35:52to make investments. But that is wrong.
1:35:58That is wrong. Trajectory—interest
1:36:00rates are not mechanically related to
1:36:02the debt trajectory. They are much more
1:36:06related to the other factors I have
1:36:09cited in such an absurd, tiresome way
1:36:12throughout this entire video, right?
1:36:16I'm harping on this because I need you
1:36:18to understand. The idea is this: I need
1:36:21you to understand exactly what my
1:36:23criticism is, because I think all of
1:36:25this here is wrong, okay? And worse, in
1:36:28the end, they will make people's lives
1:36:30more precarious for nothing. I think
1:36:33that's the worst part here, right? And
1:36:36so, just to give you an example, if the
1:36:39de-indexing of social benefits had been
1:36:42done exactly as the MBL advocates here,
1:36:46but back in the 2000s, retirees and
1:36:49people with disabilities today would be
1:36:52receiving about R $ 700, meaning they
1:36:55would be receiving less than half the
1:36:58minimum wage. Imagine retirees living
1:37:02on R $ 700. That is basically what the
1:37:08MBL is advocating for here, isn't it?
1:37:10Except, in this case, we will be those
1:37:13retirees, right? Because imagine 25, 25
1:37:16or 30 years from now without any
1:37:17adjustments, right? It’s us who will
1:37:21suffer if this crazy amendment moves
1:37:23forward. So this is not defensible in
1:37:28any way, okay? It is not even morally
1:37:32defensible, obviously, because people
1:37:34will go hungry if they stop getting
1:37:37real raises; they will lose purchasing
1:37:39power over time, or rather, they will
1:37:42lose the real income capacity they
1:37:44could have had over time, right? So,
1:37:48this is already not good, morally
1:37:49speaking, because you are attacking a
1:37:51segment of society that is already very
1:37:53fragile, you know? just to organize
1:37:56primary expenditure. So, from a moral
1:37:59point of view it is already bad, but
1:38:00technically it is also bad, because one
1:38:02might say: "No, we'll do all of this,
1:38:04but then development will come." It
1:38:06won't. It's been proven A plus B, it
1:38:09won't. All right? Actually, this
1:38:11reminds me a lot of the pension story
1:38:13that the MBL used to tell in the past,
1:38:14right? "We have to reform it, otherwise
1:38:16Brazil will go bankrupt." And in the
1:38:19end, the reform was done, and it served
1:38:22practically no purpose, right?
1:38:25Basically, the 2019 pension reform was
1:38:27a one-off adjustment, right? And now
1:38:31they are already discussing reform
1:38:33again, right? Discussing something even
1:38:36worse, okay? Twenty years from now they
1:38:39won't have anything left to make
1:38:41precarious, and yet they will still be
1:38:43discussing making fiscal adjustments,
1:38:45okay? They will be talking about the
1:38:48spending problem, that you have to cut
1:38:50spending in order to develop. And we'll
1:38:53be waiting, waiting, waiting, waiting
1:38:55for development, and development simply
1:38:57never arrives, okay? That has been the
1:38:59promise since the FHC era. "Let's
1:39:00privatize everything so there will be
1:39:02investment.""Let's do X, Y, Z so there
1:39:04will be investment." Let's open up the
1:39:06market and we'll have development. And
1:39:08in the end, nothing was developed. And
1:39:10there you have it, millions and
1:39:11millions of Brazilians needing to
1:39:13receive Lula's gas aid. That is the
1:39:15situation of the country so far, okay?
1:39:18But now the MBL is going to fix this.
1:39:21No, they aren't, okay? Because because
1:39:24they are wrong. Because the mistake
1:39:28here is not being willing to carry out
1:39:31real, deep reforms that change the
1:39:33Brazilian productive structure. All
1:39:36right? This here is not a reform. They
1:39:39aren't defending that. They haven't
1:39:42even set out to have a discussion about
1:39:44the Central Bank's actions. They don't
1:39:49even talk about it, because they
1:39:50automatically defend the bank's
1:39:52independence. That's it. And so here is
1:39:56a challenge for you liberals. Point it
1:39:58out to me. A single country in the
1:40:02world that developed its industry and
1:40:04became rich with an independent Central
1:40:06Bank. Show me one. I'll throw away my
1:40:11thesis on the Central Bank, because the
1:40:14experience I know is that countries
1:40:16first industrialized, countries
1:40:18developed, and only then did they go
1:40:20through the process of financialization
1:40:23and the process of autonomy for their
1:40:25central banks. All, all the rich,
1:40:30industrially developed countries today
1:40:32that have autonomous central banks only
1:40:35did so after development. Not before.
1:40:38There is no country in the world that
1:40:41has done that, okay? Never. And this
1:40:45happened for a very simple reason, okay
1:40:47? Because there is no development
1:40:50policy detached from monetary policy.
1:40:54It doesn't exist. Not for nothing. The
1:40:57central bank in China to this day is
1:40:59tied to the government. There's no such
1:41:02thing as independence there. And China
1:41:04is today a giant colossus, right, of
1:41:06world capitalism, right, moving along
1:41:08with long strides to one day in the
1:41:10future surpass the United States, while
1:41:13the United States is spinning its
1:41:15wheels, okay? While the United States
1:41:17is spinning its wheels. Monetary policy
1:41:20and fiscal policy need to be aligned,
1:41:23they need to serve development, which
1:41:25is definitely not what is happening in
1:41:28the Brazilian case, all right? Even
1:41:32with the economy the way it is today,
1:41:34the SELIC rate staying as high as it
1:41:36has been is unjustifiable, okay? It is
1:41:40not justifiable even by this miserable
1:41:42model. Not by this model. Not by this
1:41:46model. But just imagine, right? Imagine
1:41:50then, eh, what we could do if we
1:41:52actually had a development project for
1:41:55the transformation, you know, of this
1:41:57society. But we don't. Here it's just
1:42:02this, defending an autonomous bank,
1:42:04defending a central bank independent
1:42:06from the government, okay? Even this
1:42:09thesis, you know, saying that monetary
1:42:11policy and fiscal policy need to be
1:42:13aligned, that one has to serve the
1:42:14other, man, this is even defended by
1:42:16André Lara Resende himself, man. Read
1:42:18this book of his. Read this book of his
1:42:20here that I’ve already recommended to
1:42:22you. And then, beyond the issue of the
1:42:26bank's independence, not a word was
1:42:28said about the possibility of changing
1:42:31the single mandate, because today the
1:42:34Central Bank only pursues price
1:42:36stability. That is definitely a mistake
1:42:39. We should have an explicit dual
1:42:43mandate, where besides seeking price
1:42:46stability, the Central Bank would also
1:42:48pursue a full employment goal, with
1:42:51both pursuits having the same
1:42:53importance, just like what happens at
1:42:55the US Fed, okay? I'm not proposing any
1:42:59bizarre idea, no. I’m just saying,
1:43:01the United States does this, okay? But
1:43:04not even that is being debated here.
1:43:07And don't come telling me that, oh, the
1:43:09Central Bank already accounts for the
1:43:10pursuit of employment, etc. No, no, no,
1:43:12no, no, no, no. Okay? I'm talking about
1:43:16an explicit dual mandate, explicit with
1:43:18monetary policy instruments to do that.
1:43:21The Central Bank doesn't have that
1:43:23today; today it's a single mandate. It
1:43:25only pursues price stability via
1:43:28interest rate control. That's all the
1:43:33Central Bank does today, okay? I'm
1:43:35talking about a dual mandate goal, okay
1:43:40? For real, not just for show as is
1:43:42being suggested there today, no,
1:43:43because the employment goal—no, no,
1:43:45I'm talking about a dual mandate. Today
1:43:47the Central Bank of Brazil doesn't have
1:43:49it, okay? And so, with an independent
1:43:52Central Bank, with a spending cap, with
1:43:54fiscal adjustment, with the elimination
1:43:56of real increases in benefits, man,
1:44:00this is the perfect environment for low
1:44:03economic growth. In other words, they
1:44:06will deliver exactly the same result
1:44:08that has been recurrent over the last
1:44:10few decades, or an even worse result,
1:44:12considering the level of fiscalism. So,
1:44:15no. Renan Santos' economic plan, in
1:44:18general, is not good. It’s not even
1:44:21sophisticated, because I’ve already
1:44:23read a lot of liberal work that is much
1:44:25better than this here. That much I
1:44:27guarantee you. This here is a primary,
1:44:29weak economics text, without substance.
1:44:33And for you who like this project and
1:44:35listened to my entire argument, man,
1:44:37give yourself the chance to glimpse
1:44:39other perspectives, honestly. Consult
1:44:43all the references, okay, that I
1:44:45brought here and compare it yourself.
1:44:50And for what isn't directly referenced,
1:44:52man, just Google it, look up an article
1:44:54, take something I said and do your own
1:44:56research on it, you know? Because if
1:45:00you have a genuine concern for Brazil,
1:45:03your duty, man, is to study and
1:45:05pressure this thing as much as you can
1:45:08so that, in the end, you see what
1:45:10actually remains standing. Alright? But
1:45:15I'll tell you right now that from the
1:45:17standpoint of what is necessary to
1:45:19develop this nation, man, very little
1:45:21here stands up, almost nothing. Alright
1:45:24? And I'm saying this because I really
1:45:27want you to think about a development
1:45:30project for the sake of the project
1:45:32itself, and not for you to cling to the
1:45:34MBL's project just because the MBL made
1:45:37it, because you like the MBL, or
1:45:39because you sympathize with Renan, with
1:45:41Kataguiri, as I mentioned, and so on.
1:45:45You know, stick to the project and not
1:45:47to the personalism of the figures
1:45:49surrounding it. Don't get tied up in
1:45:52partisanship, you know? Question this
1:45:54whole thing. Like I always say, and
1:45:56don't stop saying. Question everything,
1:45:57man. So sit down, read, and question
1:45:59this thing, man. Got it? Listen to what
1:46:02I said. You don't have to agree with me
1:46:05at first. You need to listen and
1:46:06understand, hey, this guy has an
1:46:08argument. This guy sat down and studied
1:46:10the fascicles. This guy at the very
1:46:12least had the interest to know what it
1:46:14was to be able to start this discussion
1:46:16and try to do it in the most qualified
1:46:18way possible, which is what I sincerely
1:46:20try to do, try to do with the MBL for a
1:46:22long time, okay? Because I could simply
1:46:25not do this, show up here, curse Renan
1:46:27Santos and the whole MBL, calling them
1:46:29X, Y, Z, and maybe I would have many
1:46:31more views than I do, and I'd be making
1:46:33much more money than I do today, okay?
1:46:35But no, here I am making the most
1:46:37laborious video in the history of the
1:46:39channel, okay? This will probably be a
1:46:41video that people watch very little of,
1:46:42because it's going to be very long and
1:46:44it's excessively technical. So I only
1:46:46ask this of you. Consult the references
1:46:49, read, and study, because if we want
1:46:51to improve Brazil, man, it has to start
1:46:53with us, okay? With me and with you,
1:46:56right? But that's it, guys. I hope you
1:46:59enjoyed the video. I thank every one of
1:47:02you who made it this far. As always, I
1:47:04ask that you leave your opinions on
1:47:06this subject in the comments, whether
1:47:09you agree or disagree with my analysis,
1:47:11so we can dive even deeper into this
1:47:13discussion and, of course, help me with
1:47:16engagement, okay? This is the most
1:47:19requested video in the channel's
1:47:20history, but I’m sure it won't be the
1:47:22most-watched type of video, precisely
1:47:24because of its length and technical
1:47:25nature. So, if you made it to the end,
1:47:30liked the video, or got a bit upset
1:47:32because this video refutes something,
1:47:34this plan that you like, even so, man,
1:47:36for the love of God, comment. Comment,
1:47:40even if it's just to curse me out,
1:47:41because that will definitely help with
1:47:42the engagement. I really need my
1:47:45YouTube channel to start getting
1:47:46engagement again, so it costs nothing
1:47:47and you really help me out, man. As I
1:47:50said, this thing, man, it took a lot of
1:47:52work to make. So, please, leave a
1:47:55comment, okay? But no, ah, no
1:47:57engagement-bait comments, I don't want
1:47:58engagement-bait comments, come on. I
1:48:00want you to join the discussion, okay?
1:48:03I hate going on YouTube and seeing
1:48:04people commenting just for the sake of
1:48:06it, man. Oh, no. The engagement comment
1:48:09, just putting three dots there. Don't
1:48:10just comment, really comment, come on.
1:48:13You know what I mean? Make this
1:48:14environment a space for discussion,
1:48:16especially since you will refute, or
1:48:18try to refute some of my points. I know
1:48:21there will be people who will try to
1:48:22defend some things here. I know there
1:48:25might be things that I didn't quite
1:48:27understand, you know? So I need you to
1:48:29talk to me so I can see if your
1:48:32criticism makes sense or not, so I can
1:48:35also reformulate my hypotheses and my
1:48:39analysis here, okay? I need your help
1:48:42with this, alright? And remember, I
1:48:45always read most of the comments
1:48:47because of that. So don't be afraid to
1:48:49comment, to write long posts, because I
1:48:51read them. And in case you want to
1:48:54follow me on my social media, the links
1:48:55are in the video description. And if
1:48:58you want to join my book club, fill out
1:49:00the form in the pinned comment, because
1:49:02we will be starting it very soon. I
1:49:06hope you stay well and see you next
1:49:08time. M.

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