A agência britânica Reuters, publicou ontem (31) no seu site, a notícia de que o ministro da Fazenda Joaquim Levy , ao participar do "Atlantic Dialogues" em Marrakech, no Marrocos, teria defendido mudanças nas regras para a obrigatoriedade de presença da Petrobras em todas as áreas do pré-sal, instituindo maior "liberdade". Imediatamente reproduzimos a matéria da Reuters, lamentando a fala do Ministro.
Alertada por nossos leitores no Twitter, que nos enviaram o vídeo e o texto sobre a equivocada tradução da fala do ministro Levy, reproduzimos aqui (em inglês) o vídeo e o texto.
Atlantic Dialogues October 31, 2015 Conversation with Joaquim Vieira Ferreira Levy, Finance Minister, Brazil Mr. Lourival Sant’Anna: …familiarized with the situation there. The fiscal deficit is now 9.3 percent, the GDP. Public debt is 66 percent. Inflation is now 9.5 percent for the previous 12 months, to be 4.5, and the Central Bank interest rate is 14.25 percent, which is considered a ceiling formally by the Central Bank. And unemployment has reached 8.7 percent, which is really high for Brazilian standards for the past years. We are talking about a year or a year-and-a-half ago, almost no employment virtually no employment in Brazil. And the purchase power is going down. That’s why more people are looking for jobs. So that’s the pressure over unemployment rate. And the risk assessment agencies are taking the investment grade from Brazil. And the Minister is leading a fiscal adjustment, but he is terribly under pressure, politically. He is supported by the President and maybe by the economic establishment, the business people, but even the President’s party and the other parties, which were supposed to support the government, are bombarding his fiscal adjustment, and the flagship for his–to try to make ends meet is to bring back a tax over banking transactions, which is very unpopular and doesn’t have the Congress support either. So Mr. Minister–it is hard to say that. Mr. Minister, how do you fix Brazil? Dr. Joaquim Vieira Ferreira Levy: Well, I think that you have to sort of diagnose. You have to understand what is going on so you can design a strategy and then you can convince people to follow the strategy. In terms of diagnosis, you have to understand that what is going on now is, in some way, a consequence of a process that started a few years ago. In particular, usually when you have a crisis like we had in 2008, we see two things. We will first thing capital coming back to the financial centers because people would have to pay their debts and so they would liquidate assets like in Brazil and faraway places and you go to the financial centers. 2 The second things that people see that, well, their markets will be in the depression for a while. That means that consumer prices will come down, and they say, oh, let me also reduce the prices of commodities. So the big buyers of commodities will lower their price. This is typical. For 150 years, that’s always happened. There was a typical cycle. You would see capital outflows and you would see commodity prices coming down. Now, it just happened that this time was different. This time we had coordination, a global level, where you have a tremendous injection of liquidity sold. Instead of having people having to sell their assets, people actually had money and wanted to buy new assets and you saw so much of appreciation of our currency and so much acquisition and so on. So second, normally, this was the countercyclical reaction, especially of the U.S., liquidity. China had also a countercyclical reaction, which was investment. Let’s build, build, build. And that meant that instead of seeing commodity prices coming down, what you saw was commodity prices going up. And that was what you experienced from 2009 on. And also often when you get to a crisis like this, if our economy was fully synchronized, for a few years, we everything looked very easy. The fact is that countercyclical in the U.S., you will see that since 2013, you are going back, if not they have to do with different policies, which have had an impact on commodity prices. So we had faced a very important change in terms of trade. Okay? A culmination of less demand for commodities and also a depreciation of the dollar, which makes the price of commodities and dollars even lower. Okay. And also we spent a lot of discussion, the fiscal cushion. The fiscal cushion was worn out. And so now we don’t have much money to continue. Stimuli and support for this, support for that. We had to do our own consolidation. So we are a little bit like the developed economies were in 2008, 2009. We have an advantage. We don’t have high level of household leverage. We don’t even have high level of corporate leverage, which means that the time of recovery will be much shorter. But you are right. You have a large nominal deficit. It’s true that also, as you mentioned, because inflation is somewhat higher, it does mean that you have such an impact in sustainability because part of the nominal deficit is just nominal, and the nominal GDP is also growing. 3 But we have to fix our fiscal. And fixing the fiscal is very important. [Audio skip 8:37:09] council as you mentioned because inflation is somewhat higher, it does mean that you have such an impact in also growing, but we have to fix also to create an environment where interest rates can come down. And how do you fix the fiscal in a moment where, of course, after huge shock, again in terms of trade, shock, you have the economy slowing down in a time also where we don’t have much money to spend. So you cannot get out of the slowdown by spending more so you have to spend less. Well, there are two things that you have to do. You have to have a hard look at the spending sites and you have to have new taxes because in the short term, especially in an economy that is slow, you have to raise taxes. It is very unpleasant, but it is the way it works. If you look, for instance, in the UK, the first thing that the team of Mr. Cameron and Mr. Oliver did was to raise indirect taxes, VAT. In any place in the world, you have to do that so that you get the balance in the fiscal accounts. So that’s what we are doing. We are increasing some tax. In 2015, we try not to do that. We try to raise money by selling assets, by doing all of the things which have no impact on the tax burden. Actually, the tax burden in Brazil has fallen in recent years. Actually, sometimes I joke that Brazil was the only country in the world that this time that was reducing taxes in the last few years. Mr. Lourival Sant’Anna: Yeah. Dr. Joaquim Vieira Ferreira Levy: We–so now we have, in the short run, to raise this tax and you have to look at expenditure, including mandatory expenditure, entitlements. We don’t have to be very harsh in that, but you have to increase the focus, the efficiency, the quality of this spending. That’s you have to be very harsh in that, but you have to increase the focus, the efficiency, the quality percent, amount of 40 percent of the primary expenditure. If you add to that other social benefits, you get to 50. If you add another 100 billion which is about $30 billion reducing taxes through tax breaks for a number of business. We have to review that. 4 You also have to review the effectiveness of some tax breaks. Are they really achieving what they are supposed to achieve? If not, how can you redirect the spending to something that will be more efficient or just avoid the spending so that you get a better debt dynamics? So you are in the midst of that. Now, Brazil is a democracy. It means that there are some things you can do on your own, elective orders and so on. Some things you have to convince Congress. Congress has their own interests. Some of the things came as a surprise for Congress. I realize that not everybody in Congress thinks about the economy every day and every night. They have other interests. So you have to focus their interests, and this is what we are trying to do. It is taking a little bit more time than people thought would do for some very specific reasons, but I think it is moving on and more and more people realize that we have something that, on the shorthand, we’ve been saying is a one, two, three for growth. One, you fix the fiscal. Confidence comes back. The exchange rate stabilizes. Credit comes back and you have a surge in demand. Right now, demand is very depressed in Brazil because there is so much uncertainty. So everybody stopped to make decisions. When you clear the fiscal, people start to make decisions again. Life comes back to normal so you get the demand. Demand is easy in Brazil. Usually it is not very difficult to get demand. Then the hard part, which is the number three, supply, and there you have to do these so-called–economists like to call these structural reforms, which means I have to address the real problems of the economy. You have to go to the labor market and see what you can make it to at the same time be more flexible, but it does mean that you really reduce what is relevant in terms of protection. What you do in terms of competition, how you move ahead in terms of free trade, this is the third part, but it’s not that you are going to address it later. It’s just because it takes time I have to start to address now. So after you have the surge in demand, you don’t hit a wall, but rather supply can go beyond just a catch-up and then you have sustainable growth. Mr. Lourival Sant’Anna: I was going to come to free trade because there is a lot of resistance in the industry and the economic agents in Brazil. which have benefited from a lot of protectionism, and Brazil has–and it would be a way out of for 5 Dr. Joaquim Vieira Ferreira Levy: So after you have the surge in the demand, you don’t hit a wall Mr. Lourival Sant’Anna: …resistance in the industry and the economic agents in Brazil which have benefitted of the price of commodities could have been smaller if we had more added value exports. So opportunity, a historic opportunity again. Dr. Joaquim Vieira Ferreira Levy: Well, two things. First, again, diagnose. [Audio skip 08:43:25] rises. Now, 15 years ago, the share of manufacturing our exports was higher than now in terms of agriculture and commodities. Also, there is a some service sector. So that, of course, works against much easier because my colleague in the industry, Also, there is a question of taxation. The industrial sector is much more taxed than agriculture and than primary sector, and even some service sector. So that, of course, works against industry in Brazil. But looking ahead, I think that free trade is becoming something that is much more understood. Actually, my life is much easier because my colleague in the industry ministry and trade and industry ministry, actually, he believes in free trade. It is working. We are working hand-and-hand and with the President on talks about free trade with Mexico, Columbia. We actually have told the European community–Union, that we are ready to present our offer, a credible offer, including Argentina by November. We are actually, now, we want a date for European Union making their initial offer, too. And then, of course, we have to initiate negotiations. We know they are busy with important treaties and agreements and so on, but we are ready. We are knocking at the door, and we are going to make a very meaningful initial proposal. And like I said, we are talking with others, we’re also talking about facilitation of investment. And I mentioned, I think early today, that investment has been the real vector of integration in Latin America, more than trade. Brazil is a country that is very open to investment. We have been one of the major destinations for foreign direct investment. Usually among the developing countries we are second, sometimes third, but we are really in the forefront. 6 There are years that we got more direct investment than most of the largest European countries in recent years so we get a lot of investment. And you get investment from Asia, you get investment from the U.S., and you get also investment from other Latin America countries. And we also invest abroad. So I think that the stars are aligned for us to get more into the value chains. And this is important change, less thought. Brazil is a large economy so for too many years, even multinationals and others would think, okay, we go to Brazil and just supply Brazil, perhaps a little bit of the neighbors, and that will be enough. So it will be the end of the value chains. And actually, in recent years, we made some of our effective protection a little bit too much geared toward this motto, which is not a really well-generating model. Now, we understand that you have to be not only the final destination or the final end, but the part of the whole chain. And there, you have to make some changes. Not only in terms of, say, free trade, but also in terms of taxation and so on. And actually, it’s a very good moment because the discussion about international taxation has moved, has moved dramatically with VATs and some of other discussions at the level of OECD and the level Europe. I mean, the concept that the taxes have to remain where the value added happened, that was a difficulty that we had because of transfer prices and this kind of thing. This discussion has changed. The discussion about transfer prices has become much more clear and I would say more favorable to countries like Brazil. So that also facilitates we to get more involved in global value changes and use the diversity of our own industrial base, the skill of our people, the size of our markets, to leverage activities, affirm that you produce not only to the Brazilian markets, not only final products, but also parts, pieces and have this model like you have with airplanes. And, actually you have to–for instance, I didn’t mention this in the morning, but in an agriculture industry, we export a lot of parts to South Africa, for instance. They do tractor, they do all these implements for agriculture, mechanized agriculture, often with parts that come from Brazil. So that’s the type of integration that you have to do more with our African partners, and also elsewhere in the world. 7 Mr. Lourival Sant’Anna: Okay. Let’s turn to the audience ’cause we have a very qualified audience here. And we’ll take, like, four questions and then go back. You first, sir. Okay. Mic for him, okay, and then here. Mr. Pablo: Thanks. My name is Pablo. I’m from Mexico, part of the Emerging Leaders, and my question was, Director, about energy. That’s where I focus. So my question was related to Petrobras. Petrobras has a great future with the pre-salt. The next executive will be great, but Petrobras is also the most indebted oil and gas company in the world. So that’s going to be a bit challenging. So my question was pre-salt, now Petrobras has to operate those fields. Do you think it would be time to perhaps reassess that policy to allow the other major oil and gas companies to come in and help Petrobras during this major endeavor? And the last one would be, Mexico just opened its energy sector Round one was first not so good, then it improved. Do you think that Round Thirteen in Brazil showed that things must be changed, stuff like local contents? So, overall, what’s your take on energy in Brazil? Thank you. Mr. Lourival Sant’Anna: Okay. Thank you. Here. Just wait for the mic. Please identify yourselves. The mic here, please? Okay. Thanks. Mr. Marcus Vinicius De Freitas: Marcus Freitas from Brazil. Minister, it’s actually two quick questions. Our neighbors down south, Argentina, had an election last Sunday, and it was surprising to see Macri getting so many votes, which shows that Argentina is willing to change the model. It hasn’t worked out very well for them, and it seems, from the public opinion, that there is a time for them to change. Now after the measures that you are taking, will Brazil be a more liberal country? Will it be more open for business? Mr. Lourival Sant’Anna: Brazil? Mr. Marcus Vinicius De Freitas: Brazil. What are the challenges that we have to make the Brazilian economy actually flow? And, you know, there are so many ties sometimes. What are you doing to make it more liberal in the future? And what do you think will be your legacy when you leave the Ministry in the future, when you retire? 8 Mr. Lourival Sant’Anna: We’ll take these two questions, then I’ll go back to the ones you have asked for. So Petrobras, your assessment and (inaudible). Dr. Joaquim Vieira Ferreira Levy: Okay. Well, with Petrobras, I think that they are doing the right thing. They are focusing their core business. You know, companies sometimes start to be too big so they are diverting a number of business and I think this will be very good for Brazil. Taking the question of that gentleman, when you have a company like Petrobras diverting, you attract a lot of new people to some sectors, say, for instance, gas. They are selling their pipelines. This is good. A lot of people want to invest in the pipeline. And with this, we’re also going to attract other people that use gas, even imported gas or locally produced gas. We have a lot of small companies that will play an increasingly important role in producing gas, a bit like in the U.S. You have a lot of small companies, especially on the ground, not offshore. So I think that by focusing, by being more efficient–of course, we all know that costs in the oil industry really skyrocketed in the last few years so now costs are also coming back to some more real system. So I’m confident that they will develop this huge reserve of the pre-salt. And let’s be clear, pre-salt is done with all sorts of partners. I mean, you have, Shell is there in the (inaudible) you have (inaudible), you have Chinese, you have people from all–from the world. Mr. Lourival Sant’Anna: Yes, so Petrobras took legally a huge part of it. They had to be… Dr. Joaquim Vieira Ferreira Levy: Yeah, yeah. There’s a subtlety about being the operator, but it doesn’t mean that you operate alone. We can review that. You cannot give more freedom to that. Things change. Brazil knows how to adapt, okay? But you should not construe that Petrobras is doing everything alone. I mean, even Exxon was there. And you name–all the companies are there. Chevron has some fields and so on and so forth. So even in the pre-salt, okay? So I think we read yesterday when I was coming here, I was reading about the number of oil companies that have reduced their earnings because they had to make (inaudible) and so and so, it’s natural. It’s healthy that Petrobras is also doing that. I think that in Brazil, you have more people, you be good. Everybody has been participating. You think about Shell. When Shell bought BG, it’s not me who 9 is saying that, the company says, We bought BG because BG has a large stake in Brazil. And we believe this is the way to go. It’s a place where you don’t have war, you don’t have any risk. For Petrobras, it’s also nice because you have the reserves in the backyard of your own markets. I mean, very few companies in the world–you have both sides, the consumer market and the reserves, I mean, virtually together, okay? So I think this is a particular strength of the company. And, of course, all the promise in terms of the technology, everything that they have developed and so on and so forth. Now, about Argentina. I don’t know, they go to polls and let’s see what happens. What do you want to achieve? I think it’s what he asked me. We have problems to solve, you have to solve, and you have to set a little bit of template of how Brazil will deal with this past boom appeared. I mean, how you go back to use all the advantages that we have? I mean, the diversity of our economy, we have a pretty large industrial base. It has to be revamped, get back to work, okay? And I think with the change in the exchange rate, which was a natural one, just reflects the change in relative prices, they’ve become more competitive. What can we do? We can facilitate tax payments. We can make the economy more efficient. We can have, as was mentioned, this third step, this (inaudible). And I think there is increasing conversions to that. If you read the, let’s call it, manifesto that one of the leading parties in Brazil has issued a couple of days ago, if you look at what’s there, it’s exactly what we are trying to achieve and it’s making an economy that is more productive, more efficient, and that will be able to sustain continuous increase in labor income. Mr. Lourival Sant’Anna: Okay. So I remember, we have someone–yeah, I own you. Then here, okay? Then someone in the back. Ms. Marta Lucía Ramírez: Thank you. I am Marta Lucía Ramírez from Colombia. Minister, you have mentioned that you have to review the social transfers in Brazil, and we all know how important has been the (inaudible) familia, not only for the (inaudible) government, but also for (inaudible) and the politicians in Brazil. And I just in the last decade. Mr. Lourival Sant’Anna: Okay. Thank you. Here, this. 10 Unspecified Male: You mentioned in your opening remarks the importance of foreign direct investment, the tax procedures, not necessarily the tax burdens so much as the bureaucracy associated with tax, which has been an impediment to foreign direct investment in the past. Mr. Lourival Sant’Anna: Yeah. There was someone on the back. Okay. Mr. Ludovic Subran: Hi, Minister. Mr. Lourival Sant’Anna: Please identify yourself. Mr. Ludovic Subran: Ludovic Subran, I’m an economist. Brazil imported more inflation than growth from the last World Cup. You’re organizing the Olympic Games. What do you plan to do to make sure you can lift, at least temporarily, some of these trade and capital to make sure that you won’t import more inflation at the time that you still have this problem on your back. Mr. Lourival Sant’Anna: Okay. So let’s take those three, then. We’ll take these three. Dr. Joaquim Vieira Ferreira Levy: Well, I think that, first, we have to be very clear about both (inaudible). First, it’s something that doesn’t cost much money. It has increased a little bit more in the last few years, but even now it’s about half percentage of GDP. Now when you bring millions of people to a different step in life, you make them able to participate in a market economy, especially when you’re talking people in the countryside. That’s extremely valuable. We also know there are some minimum levels that, when you go over this threshold, a lot of other things are made possible. If you don’t have this money, it’s hard to send people, kids, to school because, I don’t know, you cannot buy clothes for them to go to school. These small things make a huge difference. So overall the cost is not, say, an issue. Now you have to monitor, and actually you are constantly taking people in and out of the roles. Last year in 2014, the other benefits. And like in because they are checking all the time if they continue to satisfy the criteria–income level, need, and so on and so forth. But really, (inaudible) is not this type of thing. It is much more for his intentions. And in some cases in Brazil, we have, for instance, rural pensions, other benefits. And like in any country, what really–wage is not this type of thing and you have to tighten requirements or unify Brazil has, for 11 instance, rural pensions that have very different conditions. It’s much easier to retire in the rural scheme than in the other. So you have to look carefully and see if people are not abusing that, okay? And you have to tighten requirements or, in the case of the retirement, to pensions, to make huge economies. You have to make the right diagnosis. And we are bringing people, even external people, to look at all of these things. Any country, any company, has to do that from time to time. Okay? You review your product, and you review your process. And you change whatever you need to keep being efficient. Only in Brazil, or only of Latin America, I think it’s a global problem. In Latin America, we are fortunate to have not only very independent judiciary that really go after people in audit situations and investigation, police is very free in Brazil. Okay? They are not controlled. You cannot say don’t do that, don’t do that. They get orders from the judiciary, they go after, and they simplify the life of people. I think that (inaudible) investment, like I said, it has been very strong for many, many years. Would the investigation create a cast, a shedding? To the contrary. People will increase their confidence in Brazil. It’s hard to go through this process, but it only strengthens the confidence that people have in Brazil. As of taxes, we are trying hard , but there are no gamings. Because in relation to our development level, and given our incoming distribution, taxes are relatively enforcement is–has be stronger. So what we are trying to do is to simplify taxes as much as we can. Even these tax that is meant not to be popular. One of the great advantage bank account. You take money, you pay a lady a tiny tax. That’s it. No questions. You don’t have to send people to look . You don’t have to do anything. It’s automatic. Okay. Popular in certain circles. But this is important and we are trying to do in Brazil like a because of the difference in income distribution. A lot of taxes come from indirect high earning usually form a company, and are shielded from the highest bracket in all that, and this is the way it works. Sometimes taxes is paid automatically by the consumer, but immediately by companies. And because Brazil was one of the first countries to have VAT, back in the ’60s, at the time, countries would have just sales tax. We had introduced VAT. But you need to improve them. And James Bond films are great, but now people use different cars. We have to do the same with our VAT. And this is what we’re doing. We’re simplifying, we’re making it much easier for contra-managing pact on facilitating tax compliance. And make it much more transparent. And because we have VAT at federal level and some national level, we are working in both. These are core part of our in this third step facilitating the increase in the sides. Mr. Lourival Sant’Anna: The World Cup and the Olympic Games– Dr. Joaquim Vieira Ferreira Levy: The World Cup and the Olympic Games. I don’t know if important people will take a day off to watch when Brazil was playing. Now, when the World Cup is in your home country, of course you knew that for June, people would stop. June/July and air company makes money with their traveler . Now all the businesses stay home to watch the games and so on and so forth. So there’s no surprise there. and I think it went fine. I mean, the organization was everybody was relieved that there was no real problem show that all the logistics went fine. no incidents, no terror different, because it’s basically in one city. 13 And had been pretty good. I have to say that the Olympic Committee has been very strong partnership, the International Olympic Committee. problem whatsoever. The mayor of Rio is . How many of you know the mayor of here? A few . I mean, very energetic, direct guy, who has brought we’re doing with the help of private sector. So, so far, I would say that most things are on time, and on budget. important. Mr. Lourival Sant’Anna: We have to be on time as well, asked about Germany, there’s seven, Brazil, one. Dr. Joaquim Vieira Ferreira Levy: No, talk about the Olympic Games. July 2016. Mr. Lourival Sant’Anna: Okay. Thank you so much. And let’s give applause to the Minister.