This article aims to demonstrate that there is a solution to avoid the collapse of the Brazilian economy as a result of the new Coronavirus and how to resume economic growth in Brazil after the spread of the virus. This article also shows why the Bolsonaro government does not adopt the strategies proposed in this article, which is explained by the fact that its economy minister is not competent enough to face the biggest economic crisis in the history of Brazil and for being a fundamentalist of neoliberalism for not to admit government intervention in the economy.
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How to avoid the collapse of the brazilian economy with the new coronavirus and resume economic growth in brazil
1. HOW TO AVOID THE COLLAPSE OF THE BRAZILIAN ECONOMY WITH
THE NEW CORONAVIRUS AND RESUME ECONOMIC GROWTH IN BRAZIL
Fernando Alcoforado*
This article aims to demonstrate that there is a solution to avoid the collapse of the
Brazilian economy as a result of the new Coronavirus and how to resume economic
growth in Brazil after the spread of the virus. This article also shows why the Bolsonaro
government does not adopt the strategies proposed in this article, which is explained by
the fact that its economy minister is not competent enough to face the biggest economic
crisis in the history of Brazil and for being a fundamentalist of neoliberalism for not to
admit government intervention in the economy.
A country's Gross Domestic Product (GDP) is calculated based on the sum of all its
components: GDP = C + I + G + X - M. In this formula, C corresponds to household
expenditure on consumer goods (private consumption), I corresponds to the expenditure
of investment companies, whether in capital goods or in stocks of raw materials and
products, G corresponds to government expenditure (federal, state and municipal
governments) in consumer goods (public consumption), X corresponds to export revenue
and M to import expenditure.
Based on this formula, it can be said that GDP growth can only be achieved with the
expansion of private consumption (C), the increase in investment in productive activity
(I), the increase in State expenditure (G), the increase export revenue (X) and reduced
spending on imports (M).
In the current crisis conditions of the new Coronavirus in Brazil, there is a fall in private
consumption (C) and in the investment of companies in productive activity (I) due to the
sharp drop in private consumption (C). Export revenue (X) continues to grow thanks to
the performance of agribusiness and spending on imports is decreasing due to the fall in
investment by companies (I).
According to the economic model proposed by Lord Keynes, if there is a drop in private
consumption (C), in the investment by companies in productive activity (I) and in export
revenue (X), the government must increase its spending (G) and reduce spending on
imports (M) to avoid falling economic growth to maintain a country's economic stability.
It is worth noting that the Keynesian economic model of economic stabilization considers
that the government should intervene to combat recessions and economic depressions
such as that of 1929, compensating with public spending (G) the drop in household
consumption (C), of business investment (I) and of export revenue (X).
The Keynesian model was adopted by the government of President Roosevelt in the
United States after the depression of 1929 that allowed to recover its economy and, also,
in all the countries of the world after World War II when it was replaced in 1990 by the
neoliberal economic model that admits the government intervention in the economy only
on an exceptional basis. The neoliberal economic model has become dominant throughout
the world since 1990, being responsible for the global crisis of 2008 that was only
mitigated thanks to the interventions of governments in all countries of the world.
2. The increase in government spending (G) is crucial to fight the recession and make the
Brazilian economy grow. While the crisis of the new Coronavirus continues, the federal
government should increase its spending (G) with distribution of basic income to
vulnerable and unemployed populations, with the creation of a low-interest credit line to
avoid the bankruptcy of companies, especially micro, small and medium-sized
companies, as well as with fiscal and financial incentives for the development of
electronic commerce.
This increase in government spending (G) would help to minimize the drop in household
consumption (C) and keep companies in operation, which would result in less layoffs of
workers, thus avoiding the compromise of household consumption. With the increase in
government spending (G), the federal government would be collaborating to minimize
the drop in GDP that is expected to be 8% in 2020, according to the World Bank. The
federal government can further leverage household consumption (C) if it adopts an
attractive interest rate credit policy that encourages consumers to buy.
While the federal government helps companies with the creation of a low interest credit
line, especially for micro, small and medium-sized companies, companies in general need
to reinvent themselves with the adoption of electronic commerce and the provision of
services outside their facilities. By adopting this procedure, companies would encourage
the consumption of families (C) and other companies that demand their services, in
addition to contributing to the increase in private investment (I).
To finance the actions of the federal government, one can use the country's international
reserves in the amount of US$ 320 billion. But, to reactivate the economy after the new
Coronavirus pandemic, the government must act as if it were a locomotive making
expenditure (G) capable of driving the increase in household consumption (C), business
investment (I) and revenues exports (X) and reduced spending on imports (M).
The government should increase its spending (G) with the making of massive investments
in economic infrastructure (energy, transport and communications) and social
infrastructure (education, health, housing and basic sanitation) that demand resources of
the order of R$ 2 trillion. The federal government would thus act as an inducer of the
resumption of economic growth in Brazil with the realization of these investments.
This government action with a broad program of public infrastructure works (energy,
transport, housing, basic sanitation, etc.) with the participation of the private sector would
contribute to combat current mass unemployment by raising the levels of employment
and household income and consequently, to promote the expansion of consumption by
families and companies resulting, respectively, from the increase in the wage bill of
families and the income of companies. This government action would contribute to
increase household consumption (C) with an increase in the population's wage bill and in
the investment of companies (I).
To raise the level of private sector investment (I), it is necessary for the government to
implement a policy of tax incentives and attractive interest for businessmen. Economic
growth can also be achieved by raising the level of exports (X) even in the face of an
unfavorable scenario of growth in international trade, and also by reducing imports (I)
with the policy of substituting imported goods aiming the expansion of domestic
economic activities. It is important to note that the domestic production of imported goods
3. would contribute, not only to increase GDP, but also to generate jobs, thus contributing
to combat the gigantic unemployment in Brazil.
About the policy of substituting imported goods, the crisis of the new Coronavirus reveals
the importance of national self-sufficiency. The decision of governments in various parts
of the world, including Brazil, since 1990, not to produce locally, transferring it to places
where profit margins would be higher, was a determinant of the decision of governments
not to invest in the production of medical materials and equipment in their countries by
transferring it to the countries with the lowest production costs, such as China. The result
is catastrophic because there is a lack of inputs for the manufacture of drugs, respirators
and even masks for the protection of health professionals and the population at this
moment when facing the new Coronavirus.
In Brazil, the situation is deplorable because industry, science and national technology
have been scrapped since 1990 with the adoption by the various governments of
neoliberal policies that have contributed to increasing technological and industrial
dependence on the abroad. The current retraction of the Brazilian industry reveals the
sector's inability to react and the prospect of a reversal of the situation is very difficult in
the current conjuncture of economic recession aggravated by the crisis of the new
Coronavirus. This retraction of the Brazilian industry comes since the 1980s, when the
participation of the manufacturing industry in the Gross Domestic Product (GDP) was
33% and, in 2019, it did not exceed 11.3%. It is the lowest level in 80 years. Stagnant, the
industry has the lowest share of GDP since the late 1940s.
From the above, it can be concluded that countries like Brazil should pursue their self-
sufficiency by abandoning the current, neoliberal and economic and financial
globalization policy, responsible for their economic weaknesses and dependence on the
abroad, with their replacement by the development model that prioritize the production
within the country of products and services essential for its economic and social progress.
Only then will it be possible to make Brazil grow economically at high rates and eliminate
the underutilization of the workforce that reaches the record level of 27.7 million workers,
according to the PNAD survey by IBGE.
Unlike what we are proposing to minimize the effects of the new Coronavirus on the
Brazilian economy and resume its economic growth, the Bolsonaro government remains
inert, doing nothing to prevent the devastating effects of the new Coronavirus on
household consumption and corporate investment. This inertia of the Bolsonaro
government must be charged to the incompetent Economy Minister Paulo Guedes, who
has not managed to reactivate the Brazilian economy in stagnation since 2015 and also
does not know how to face the economic and social debacle of Brazil as a result of the
new Coronavirus.
Ever since he took over the Economy Ministry of the Bolsonaro government, Paulo
Guedes, a neoliberal fundamentalist, designed the Social Security reform and the
privatization program for state-owned companies that, in his view, would be able to
reactivate the Brazilian economy. None of this happened. The Brazilian economy remains
stagnant with meager economic growth rates and which, according to the World Bank,
should have an 8% drop in GDP in 2020.
4. In addition to being incompetent in driving the Brazilian economy, Paulo Guedes
collaborated with the Bolsonaro government by transforming the Brazilian nation into a
country subordinate to the interests of the United States and international capital. This
subordinate alignment to North American interests and international capital is manifested
with the delivery of the Alcântara Base to the United States, with the denationalization of
Embraer with its sale to Boeing, by making a huge oil auction in the pre-salt area, carrying
out the greater delivery of national wealth in history to foreign capital with the surplus
area of the “transfer of rights” of Petrobras in the order of 30 billion barrels in the giant
fields and with the dismemberment of Petrobras to weaken it with a view to its
privatization.
Paulo Guedes affirmed that he intends to privatize all the public assets, consequently
handing it over to foreign capital. Privatizing implies, in fact, what is usually called
"denationalization", in which the controlling acquirers are almost always (if not always!)
Foreign companies or consortia whose profits are remitted to their headquarters abroad.
The use of the term "privatization" is a way of hiding its true purpose, which is to hand
over the nation's assets to foreign capital. In addition to being incompetent in the
management of the Brazilian economy, Paulo Guedes acts as a lackey for the interests of
foreign capital in Brazil. As long as Paulo Guedes remains in charge of the Ministry of
Economy and Bolsonaro in the presidency of the Republic, we will not overcome the
huge current economic and the future problems of Brazil.
* Fernando Alcoforado, 80, awarded the medal of Engineering Merit of the CONFEA / CREA System,
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 author of the
books Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem
Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os
condicionantes do desenvolvimento do Estado da Bahia (Tese de doutorado. Universidade de
Barcelona,http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora
Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos
na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social
Development- The Case of the State of Bahia (VDM Verlag Dr. Müller Aktiengesellschaft & Co. KG,
Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (Viena- Editora e Gráfica,
Santa Cruz do Rio Pardo, São Paulo, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate
ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011), Os Fatores
Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), Energia no
Mundo e no Brasil- Energia e Mudança Climática Catastrófica no Século XXI (Editora CRV, Curitiba,
2015), As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo (Editora CRV,
Curitiba, 2016), A Invenção de um novo Brasil (Editora CRV, Curitiba, 2017), Esquerda x Direita e a sua
convergência (Associação Baiana de Imprensa, Salvador, 2018, em co-autoria) and Como inventar o futuro
para mudar o mundo (Editora CRV, Curitiba, 2019).