Wed | Dec 13, 2017

Michael Temer | Brazil is back on track

Published:Wednesday | November 29, 2017 | 12:00 AM
President of Brazil, Michel Temer.

Just over 18 months ago, I took office as the president of Brazil with the task of facing up to a severe economic crisis along with its deep social impacts on our people. Since then, I have put forward an agenda, which comprises a set of structuring reforms based upon the pillars of fiscal balance, social responsibility and increase in productivity.

The results are already visible. The economic recession in Brazil has been reversed and the economy has grown for the last two consecutive quarters. Analysts forecast a one per cent growth in GDP in 2017. Inflation, which was about 10 per cent in May 2016, stands below the target, recorded at 2.54 per cent in September. The interest rate for May was 14.25 per cent, and has been dropping in a sustainable manner. The SELIC rate - the central bank's overnight rate - is currently 7.5 cent, the lowest in four years. The decrease in the interest rates has ensured an additional US$24.3 billion to the Treasury.

Our trade balance has been breaking records. Brazil reached a trade surplus of US$58.477 billion between January-October 2017, an increase of 51.8 per cent compared to the same period of 2016. Industrial output increased by 1.6 per cent over the same period. Vehicle exports grew by 55.7 per cent in relation to 2016 and have already reached the 560,000 units produced in 2017. Sales of new vehicles in the domestic market grew by 9.28 per cent in comparison with 2016. Grain crops should reach the historic record of 242 million tons in 2017, an increase of 30 per cent in relation to 2016.

This virtuous cycle is due to the recovery of trust in the Brazilian economy. The Business Confidence Index (FGV) peaked at 90.3 points in October, the highest level since July 2014. The IBOVESPA index - of about 50 stocks that are traded on the Sao Paulo Stock, Mercantile & Futures Exchange - has surpassed 76,000 points in September 2017, recovering from 38,000 points from January 2016. The energy auctions, held under the new regulatory model, including those of pre-salt, raised US$6.7 billion. Only in the energy sector, investments of US$135.3 billion are expected over the next few years, creating up to 500,000 new jobs.

 

Generating profits

 

Economic rationality and predictability measures have improved the business environment with initiatives such as de-bureaucratisation in the agricultural, services, retail and foreign trade sectors. The State Enterprise Responsibility Law has enabled a professionalisation of state enterprises, generating profits of US$5.26 billion in the first half of 2017. Aiming at raising productivity, an employment reform modernised and brought workers from the shadow economy into formal employment.

The success of this agenda has already been reflected in employment recovery, with an increase in the employment rate indexes. In 2017, 163,000 jobs were created, in comparison to the loss of 448,000 jobs between January and May 2016. In the third quarter of 2017 more than 1,061 million jobs were created in Brazil, and from those more than 524,000 people have left the unemployed ranks.

Social welfare programmes, which had been previously put at risk on account of fiscal collapse, have been recovered in tandem with the ceilings established under the Constitution and thanks to efficiency in public spending. The Bolsa Familia, benefit has been increased by 12.5 per cent (after two years without adjustments). The government has launched the Progredir, (getting ahead) programme, helping families to obtain employment and to achieve autonomy. I have released the FGTS and PIS-PASEP withdrawals, which have benefited millions of Brazilians and injected US$18.3 billion into the economy. The health and education budgets have increased. Resources for the purchase of essential medicines reached US$30.5 million/year. The Student Financing Fund has offered 75,000 new study places and US$213.7 million were allocated to this fund. With the launch of the Geostationary Satellite, a decisive step has been taken towards the universalisation of access to broadband Internet in Brazil.

The results show that the strategy put forward by the Brazilian government is the right one. We have left the economic crisis behind and are back on the development track. The next step will be the continuity of reforms. Simplifying tax law will increase the competitiveness. With the support of the National Congress, of workers and the business community, we are putting Brazil back on track.

- Michel Temer is the President of the Federative Republic of Brazil. Email feedback to columns@gleanerjm.com