The Lula government has reached the "final mile" of its economic agenda. According to Finance Minister Dario Durigan, it focuses precisely on the two issues that most trouble the government: high interest rates and public debt.
“We are missing the final mile. It is crucial that the fiscal commitment is brought forward; it is a central part of the puzzle,” Durigan said on stage at Expert XP on the morning of Friday, July 24.
According to the Finance Minister, balancing public accounts is essential for the country to navigate an international landscape marked by uncertainties and challenges.
Durigan's statement was an attempt to reinforce the message that fiscal responsibility is part of the agenda – a message the government is having difficulty conveying to the financial market.
Durigan stated that President Luiz Inácio Lula da Silva has mandated that all campaign proposals related to the topic must go through the Ministry of Finance. "It makes no sense to spend three and a half years in an insane battle over spending cuts and revenue replenishment only to abandon this," he said.
The minister argued that the government has sought to adjust the accounts structurally from day one, "without becoming corrupt," and that this work would allow it to project a primary surplus of 0.5% next year, the first in almost a decade. According to him, public debt should begin to decline from 2030 onwards.
But that's precisely where the most difficult part of the "final mile" begins. The next step, in Durigan's view, will be to discuss reducing mandatory spending to free up space for investment and make the state more efficient.
The minister stated that there is no reason to avoid debating the quality of public spending and argued that the issue should be addressed after the elections.
In the corridors of Expert XP, however, managers interviewed by NeoFeed are skeptical of the government's efforts at fiscal adjustment and, on the contrary, are betting on increased spending in a possible fourth term for President Lula.
The productivity factor
The Central Bank is looking at an economy that is beginning to be transformed by new technologies. Gabriel Galípolo, who took the stage shortly after Durigan's departure, stated that the path to helping the economy escape the trap of high interest rates lies in productivity, a variable yet to be achieved in the Brazilian economy.
The president of the Central Bank stated that artificial intelligence can increase the resilience of companies and the economy in the face of volatility in international prices and Treasuries, by allowing for faster adjustments to costs, processes, and decisions.
"Artificial intelligence is one of the analytical drivers for every central banker today, alongside oil and El Niño," said Galípolo.
He was, however, careful to analyze how workers perform tasks and how this can produce efficiency gains. In Galípolo's view, technology can increase the economy's adaptability, but it still needs to prove how much additional growth it will be able to produce.
If artificial intelligence allows companies to do more with the same resources, or to adjust costs and processes more quickly, it can help reduce some of the effects of external shocks on the economy.
Durigan's "final mile" involves an economy capable of producing more, adapting quickly to technological changes, and absorbing shocks with less impact on prices. Neither of these can be solved by increasing tax revenue or raising interest rates.
