After almost three months as President of the Republic, Michel Temer has not been able to overcome the serious economic crisis that has affected Brazil since the Dilma Rousseff administration and has led to the unemployment of 12 million unemployed, the bankruptcy of thousands of companies and the insolvency of the Union and States of the Brazilian federation. The ineffectiveness of the Temer government is blatant because its proposal of public accounts solution is not rational, it does not promote economic growth to combat the economic stagnation that threatens the country's future and does not create the environment conducive to private investment in productive activity. Government leaders in Brazil need to understand that in an exceptional situation like this there is an imperative need to plan the national development. The Michel Temer government has to come out of its passivity and take a proactive stance. The Brazilian government should elaborate an economic plan that contributes to the retaking of the development of Brazil that report for the population and for the productive sectors a perspective of retaking of economic growth.

1. 1
HOW TO RETAKE THE ECONOMIC DEVELOPMENT OF BRAZIL
Fernando Alcoforado *
After almost three months as President of the Republic, Michel Temer has not been able
to overcome the serious economic crisis that has affected Brazil since the Dilma
Rousseff administration and has led to the unemployment of 12 million unemployed,
the bankruptcy of thousands of companies and the insolvency of the Union and States of
the Brazilian federation. The ineffectiveness of the Temer government is blatant
because its proposal of public accounts solution is not rational, it does not promote
economic growth to combat the economic stagnation that threatens the country's future
and does not create the environment conducive to private investment in productive
activity.
The measures taken by the Michel Temer government are timid because the
Constitutional Amendment Bill (PEC 241) does not solve the problem of public
accounts by freezing public spending for 20 years, excluding the payment of interest on
public debt, as well as deepening the recession. What is the problem of public accounts
in Brazil? Explosive growth in government spending fueled by the disproportionate
expansion of public debt currently reaching R$ 3.7 trillion, which obliges the
government to allocate 44.93% of the Union budget to the payment of interest (R$ 635
billion) on public debt. The main problem with public accounts lies in the explosive
growth of public debt and not in the running costs of the federal government.
The real fiscal adjustment that should be adopted at the moment would contemplate, on
the one hand, the increase of the public tax collection with: 1) taxation of the great
fortunes with assets superior to 1 billion Reais that could yield approximately 100
billion Reais per year; And (2) an increase in the tax on banks and, on the other, to
reduce government spending by: 1) drastically reducing the number of ministries and
public agencies and expenditures at all levels of government; And, 2) a drastic reduction
of the basic interest rate of the economy (Selic) to reduce the size of public debt and the
burden of paying interest and public debt amortization.
How to reduce interest payment charges and public debt amortizations, in addition to
the drastic reduction of the Selic rate? To reduce interest payments and public debt
amortizations, the Brazilian government needs to renegotiate with creditors the
lengthening of public debt payments so that the federal government can dispose the
necessary resources for its investments in economic and social infrastructure. In
addition to the ineffectiveness of fiscal adjustment with PEC 241, no measure was
proposed by the Michel Temer government to combat the economic stagnation that
tends to deepen in the coming years as a result of PEC 241. Nothing is being proposed
to reduce stratospheric bank interest rates, the gigantic tax burden and the public debt
problem.
Government leaders in Brazil need to understand that in an exceptional situation like
this there is an imperative need to plan the national development. The Michel Temer
government has to come out of its passivity and take a proactive stance. The Brazilian
government should elaborate an economic plan that contributes to the retaking of the
development of Brazil that report for the population and for the productive sectors a
perspective of retaking of economic growth. Instead, the Michel Temer government
adopts a neoliberal economic policy that abdicates of the intervention of the Brazilian
State in the economic environment differently from the successful developmental

2. 2
policies adopted in Asia by Japan, South Korea and China in which the State played a
fundamental role in its Economic progress in the 1970s, 1980s and 1990s.
It is the inexistence of a development plan one of the factors that lead to the immobility
of the private sector in the realization of investments in Brazil leading to a real
paralysis. PEC 241 and the program of concessions for private sector participation in
investments in the country's logistics infrastructure are insufficient to create the
environment conducive to private investment at the moment in Brazil. Foreign direct
investment will not increase in Brazil in an environment of economic stagnation and
political and social instability as we face. The Michel Temer government needs to take
urgent measures to combat economic stagnation that would contemplate the following:
 The Central Bank needs to act on the financial system to drastically reduce its
interest rates (150.70% per year in May 2016 for individuals and 66.31% per year
for companies in January 2016) to encourage household consumption and private
investment.
 The federal government has to reduce the tax burden (33% of GDP) by reducing its
interest payment and public debt amortization (44.93% of the Union budget) by
renegotiating with creditors the lengthening of its payment.
 The federal government should attract the private sector to invest R$ 1.6 trillion in
energy, transportation, communications and basic sanitation infrastructure to reduce
the cost of its logistics.
The government Michel Temer needs to create in Brazil the environment conducive to
private investment by seeking: 1) the favorable evolution of the public debt that today
has an explosive tendency; 2) the favorable evolution of the external accounts
threatened by the growing of the deficit in the Balance of payments; 3) the favorable
developments in public accounts whose increasing deficit may lead to insolvency of the
Union, States and Municipalities; 4) the country's economic growth today in stagnation
with the continued decline of GDP; 5) the use of investment opportunities, especially in
agribusiness and mineral sector infrastructure and exports; 6) the increase in the
profitability of investments that are low and has negative values; 7) the creation of
financing facilities by reducing the exorbitant interest rates of the banking system; 8)
the drastic reduction of the tax burden which is one of the largest in the world; 9) the
adoption of developmental government policies with national development plan and
industrial policy; 10) the conquest of political stability overcoming the problems of
governability and great dissatisfaction of the population; And, 11) the conquest of social
stability, overcoming mass unemployment and the growth of crime in the country.
To encourage private investment, the Michel Temer government needs: 1) to promote
the program of utilization of idle capacity and expansion of productive activity in the
primary, secondary and tertiary sectors; 2) to promote a program of investment in
economic and social infrastructure (R$ 2 trillion) to reduce mainly the cost of energy
and transportation logistics; 3) to promote a broad program of exports, especially
agribusiness and the mineral sector; 4) drastically reduce bank interest rates to
encourage household consumption and investment by companies; 5) to reduce the tax
burden by lowering the burden of paying interest and amortizing of public debt and
rationalizing the government's administrative structure; 6) to reduce the cost of energy
and transportation with the improvement of economic infrastructure; And, 7) to
implement the fixed exchange rate to replace the floating exchange rate to encourage
exports.

3. 3
In addition, the Brazilian government should adopt measures to reduce Brazil's external
vulnerability. Capital control is the most important part of a sustained growth and
economic development strategy, especially in economies marked by macroeconomic
instability such as Brazil. The control of capital must be carried out with the taxation on
the inflow of foreign capital. The Brazilian government should require that a certain
percentage of the foreign investment be retained in reserve for a certain number of days
with the Central Bank to limit the volatility of capital flows. This type of control, called
"lock-in" policy, would prevent a sudden outflow of capital.
Capital control allows the selection of capital flows by confining speculative capital to
manageable volumes and isolating the economy to some degree from external financial
shocks. Several countries in Asia have adopted measures to discipline the inflow and
outflow of capital, which have achieved great economic success and greater stability
than those applying the neoliberal model such as Brazil. In China and India, capital
transactions depend on government authorization. China and India, which have never
abandoned control over capital, are now synonymous with continued economic growth.
Unlike China and India, Brazil is a highly vulnerable country.
* Fernando Alcoforado, member of the Bahia Academy of Education, engineer and doctor of Territorial
Planning and Regional Development from the University of Barcelona, a university professor and
consultant in strategic planning, business planning, regional planning and planning of energy systems, is
the author of 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. Muller
Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe
Planetária (P&A Gráfica e Editora, Salvador, 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) and As Grandes Revoluções Científicas, Econômicas e Sociais que Mudaram o Mundo
(Editora CRV, Curitiba, 2016) .