It should be noted that the results of the study of the Ministry of Economy cannot be considered as irrefutable truth because they have no scientific basis. It was another scenario building exercise that is a technique that assumes that there are uncertainties and unpredictability that do not ensure that its results will happen. The document of the Ministry of the Economy tries to convince the Brazilian population using, therefore, a technique that does not have a deterministic base.

1. 1
THE LIE OF THE MINISTRY OF THE ECONOMY OF BOLSONARO ABOUT
THE BENEFITS OF THE REFORM OF THE SOCIAL SECURITY
Fernando Alcoforado*
The Ministry of Economy informs that Brazil may enter into recession from the second
half of 2020 if the pension reform is not approved and the unemployment rate would
reach 15.1% in 2023. The growth of the Gross Domestic Product) in 2019, the first year
of the Bolsonaro administration, would be less than 1%. By 2023, the economy would
continue on a recessive trajectory reaching GDP drop of 1.8%. If no reform were
approved over the projection horizon, annual GDP growth would tend to average 2.9
percentage points lower over the next five years compared to the scenario of changing
social security rules. The document was prepared to try to convince the Brazilian
population of the importance of approving the proposed Social Security reform sent by
the Bolsonaro government to the National Congress.
The Ministry of the Economy correctly informs that the lack of control of public
accounts is at the root of the serious economic crisis that the country has been going
through arguing falsely that the current fiscal deterioration results from the increase in
government spending on social security benefits that corresponds to 24% of the Union's
budget without mentioning, however, to the largest factor responsible for the
government's fiscal crisis represented by the burden of paying the public debt, which
corresponds to 44% of the Union's budget. The current fiscal crisis is fundamentally due
to the excessive growth of the public debt and not the expenses with Social Security.
Erroneously, the Ministry of Economy predicts that there will be less and less room in
the budget for maintaining public expenditures essential to the well-being of the
population (education, health, safety, sanitation) and public debt will inevitably go
unsustainably if not happen the reform of Social Security.
In reality, there will be less and less budget space for maintaining public expenditures
essential to the well-being of the population (education, health, safety, sanitation and
even social security) if the federal government increasingly payment of the public debt
burden. The main effort that should be developed by the federal government would be
to reduce the burden of paying public debt and not to reduce spending on Social
Security. Public debt will inevitably enter unsustainable trajectory, not with the
maintenance of Social Security spending, but especially if the federal government
continues to spend more than collection taxes. To reduce government spending, it must
eliminate superfluous expenditures and unnecessary organs, and in order to raise more
collection taxes, it is necessary to make the Brazilian economy grow and tax large
fortunes, dividend income and banks.
The economic team warns that the unemployment rate may once again hit record highs
if welfare reform is not approved. The Ministry of Economy says that the
unemployment rate could reach 15.1% in 2023 without changes in the rules of
retirement and pension in the country. On the other hand, the approval of the reform
could make this rate fall to almost half, to 8, 0%. That is because changes in the rules
could create nearly 8 million jobs by 2023 - an average of 1.33 million per year and that
job creation potential would increase, according to government estimates without
explaining how this "miracle" job creation would take place.
Without the reform of Social Security, the interest rate would rise sharply to 18.5% by
2023, predicts the Ministry of Economy. Already with the reform, the Selic rate could

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reach around 5.6% per year in 2023. Without changes in social security rules, the
Ministry of Economy predicts a catastrophic scenario for the government's gross debt,
which would enter an explosive trajectory. In the scenario without reform, the fiscal
indicators would worsen considerably: the primary result of the consolidated public
sector would remain permanently deficient. Already with the reform, differently,
surpluses are generated as from 2021. In the absence of reform, the gross debt of the
federal government would continue in an explosive trajectory, whereas in the reform
scenario, not considering extraordinary revenues, it would begin to decline. starting in
2021. "The more the pension reform was postponed, the greater the cost for the
Brazilian population," says the document of the Ministry of Economy.
It should be noted that the results of the study of the Ministry of Economy cannot be
considered as irrefutable truth because they have no scientific basis. It was another
scenario building exercise that is a technique that assumes that there are uncertainties
and unpredictability that do not ensure that its results will happen. The document of the
Ministry of the Economy tries to convince the Brazilian population using, therefore, a
technique that does not have a deterministic base.
The Ministry of Economy's estimate is that Social Security reform would make it
possible to save R$ 1 trillion in 10 years, which would mean an average of R$ 100
billion per year. Taking into account that GDP (Y) is calculated by the formula Y = C +
I + G + X -M in which C corresponds to household consumption, I private sector
investment, G government expenditure, X export revenue and M spending on imports,
the economy of spending on Social Security reform would reduce G's government
spending by R $ 100 billion annually, increasing its investment capacity equivalent to
that of 2014 (R$ 99.1 billion ) and is derisory in comparison, for example, with the R$
845.25 billion investment needed to sustain GDP growth rates of 5% per year.
In order to solve the problem of the deficit in the public accounts, a reason alleged by
the Bolsonaro government to carry out the Social Security reform, the federal
government should adopt as a fundamental strategy the reactivation of the Brazilian
economy which, in addition to tackling the unemployment problem of 13 million
workers and 14 million discouraged workers, would contribute to raising tax revenues
through a broad program of public infrastructure works (energy, transportation, housing,
sanitation, etc.) and, as a consequence, promote the expansion of household
consumption resulting from the increase employment and wages, and corporate income
from investments in public works. In addition to the public works program, the
Brazilian government should develop a broad export program, especially agribusiness
and the mineral sector, and promote drastic reduction of bank interest rates to encourage
household consumption and investment by companies, reduction of costs of public
administration with the freezing of the high salaries of the public sector, the cut of
stewardships and organs of the public administration.
In addition to adopting the strategy of reactivating the Brazilian economy to raise tax
revenues and reduce public administration costs, the federal government should
promote public debt auditing followed by reduction of interest payments and public
debt amortization to be renegotiated with public debt creditors. The Federal Budget for
2019 corresponds to R$ 3.262 trillion. Among the expenses, the financial expenditure
with the so-called public debt stands out, which will consume almost 44% of the entire
budget, or R$ 1.425 trillion. Expenditures on debt comprise debt amortization expenses
of R $ 1.046 trillion and interest expense and debt charges of R$ 379 billion, totaling R$

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1.425 trillion. Spending on public servants - active and retired - will consume R$ 350.4
billion. Expenditures on Social Security (INSS) are expected to reach R$ 625 billion,
well less than half of what will be spent on public debt. The amount destined for public
investment is insignificant for a country like Brazil of only R$ 36 billion. Therefore, the
high deficit of public accounts is clearly located in the financial expenditures with so-
called public debt - which has never been audited, as mandated by the Constitution and
not Social Security expenditures.
In addition to adopting the strategy of reactivating the Brazilian economy to raise tax
revenues, reduce public administration costs, and reduce the burden of interest
payments and public debt amortization to be renegotiated with public debt creditors,
federal government should go after the large debtors of Social Security whose debt
totals R$ 426 billion. It should be noted that among the 400 largest Social Security
debtors are Bradesco (R$ 465.2 million), Itaú (R$ 88.8 million), Caixa Econômica (R$
549.5 million), Banco do Brasil (208,2 million), Santander (R$ 80.8 million), Banco
Rural (R$ 124.8 million), CBTU (R$ 131.6 million), Friboi (R$ 1.8 billion), Jornal do
Brasil (274.9 million), Lojas Americanas (R$166 million), Oi (R$ 126,5 million), Usina
Santa Rita (R$ 205,5 million), Usina Santa Helena (R$ 159.5 million, Usina Santa
Maria (R$ 76.7 million), Vasp (R$ 1.5 billion), former Parmalat (R$ 25 billion). These
are just some of the cases of large Social Security debtors.
* Fernando Alcoforado, 79, holder of the CONFEA / CREA System Medal of Engineering Merit, member
of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional
Development by the University of Barcelona, university professor and consultant in the areas of strategic
planning, business planning, regional planning and planning of energy systems, is the author of 14 books
addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and
Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and
The Great Scientific, Economic, and Social Revolutions that Changed the World.