In order to solve the problems of internal public debt and unemployment, the federal government will have to renegotiate with its creditors (national and foreign banks, investment funds, pension funds and non-financial corporations) the reduction of expenses with the payment of debt service lengthening the payment of interest and amortizations of the public debt for the federal government to have the necessary resources to reactivate the Brazilian economy.

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INTERNAL PUBLIC DEBT AND MASS UNEMPLOYMENT IN BRAZIL ARE
THE PROBLEMS THAT DEMAND IMMEDIATE SOLUTION
Fernando Alcoforado *
Article under the title Aperte o bolso: o calote vem aí (Fasten the pocket: the default
comes) from Luiz Cezar Fernandes, a partner of Grt Partners and creator of the banks
Garantia and Pactual, available on the website
<https://www.brasil247.com/pt/247/economia/313073/Banqueiro-avisa-o-calote-da-
d%C3%ADvida-vem-a%C3%AD.htm>, demonstrates the unsustainability of domestic
public debt whose content is as follows:
The next government will inevitably be seduced by a default on public debt. The growth
of the domestic public debt will reach 100% of the Gross Domestic Product - GDP of
Brazil, already in the next government. The situation will be unsustainable, generating
complete ungovernability. Banks, now cartelized into 5 large organizations, have
reduced lending to the private sector and have invested, in reverse, the application of
public debt securities.
Countries that recently fell into default, such as Greece, did not cause major internal
shocks because their debt was mostly external and largely sprayed, including central
banks, mutual funds and pension funds. The case of Brazil is essentially diverse. A
default of our internal debt will lead to bankruptcy of the system, ranging from large
banks to individuals, through family offices and the like. To avoid a bank run, large
banking institutions will have to prevent their customers from withdrawing their savings
in sight or in the long term. Otherwise, we will have an even worse situation than that
experienced by Venezuela. Reforms already or there will be only the default.
This article by the banker Luiz Cezar Fernandes confirms our thesis presented in
numerous articles of ours that the public debt represents the biggest problem of Brazil
that is demanding immediate solution. If there is no reversal of the trend of domestic
public debt and the policy of paying interest and amortizations, the imbalance between
demand and availability of resources to meet Brazil's economic and social infrastructure
needs and transfer to social security, states and municipalities will accentuate with the
passage of time to the detriment of the population and the national productive sector.
To solve the problem of internal public debt, the federal government will have to
renegotiate with national and foreign banks (creditors of 55% of public debt),
investment funds (creditors of 21% of public debt), pension funds 16% of the public
debt) and non-financial corporations (creditors of 8% of the public debt), the reduction
of the expenses with the payment of the service of the debt lengthening the payment of
interest and amortizations of the public debt. Without this solution, the scenario set by
the banker Luiz Cezar Fernandes will occur with the failure of the system, the
bankruptcy of banks and the confiscation of the savings of individuals.
In addition to internal public debt, mass unemployment tends to lead the country to an
unprecedented social upheaval. Publication of the newspaper Estado de S. Paulo under
the title Falta emprego para 27,6 milhões no País, mostra IBGE (Missing 27.6 million
jobs in Brazil, shows IBGE), available on the website
<https://economia.estadao.com.br/noticias/geral,falta-emprego-para-27-6-milhoes-no-
pais-mostra-ibge,70002455439>, reports that work is missing today for 27.636 million
Brazilians. This information was published by the Quarterly National Continuous

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Household Sample Survey, compiled by the Brazilian Institute of Geography and
Statistics (IBGE). These numbers are a picture of the employment situation in the
country in the second quarter of 2018 (April, May and June). The rate of under-
utilization of the labor force is an indicator that includes the percentage of
unemployment, the rate of underemployment due to insufficient hours, and the rate of
the potential workforce, people who are not in search of a job but would be available to
work.
One more information gets attention. The country has 3.162 million people in search of
a job for more than two years. Brazil reached a record 4.833 million people in a
situation of discouragement in the second quarter of 2018, the highest level of the
historical series started in 2012 by IBGE. In the first quarter of 2012, the beginning of
the historical series of research, this population totaled 1,995 million. The discouraged
population is defined as one who was out of the labor force for one of the following
reasons: he could not get work, or had no experience, or was very young or old, or
found no work in the locality and that if he had gotten a job, would be available to take
the job. The discouraged are part of the potential workforce. In the second quarter of
2018, the highest rates of unemployment among the units of the federation were Amapá
(21.3%), Alagoas (17.3%), Pernambuco (16.9%), Sergipe and Bahia (16.5%). The
lowest rates of unemployment were observed in Santa Catarina (6.5%), Mato Grosso do
Sul (7.6%), Rio Grande do Sul (8.3%) and Mato Grosso (8.5%).
In order to solve the problem of mass unemployment in Brazil, it is necessary first of all
to renegotiate with the creditors the lengthening of the payment of the public debt
burden for the federal government to have the necessary resources to reactivate the
Brazilian economy, to immediately adopt the measures described below:
1) Elaboration of a program of works on economic infrastructure (energy, transport and
communications) and social infrastructure (education, health, housing, basic sanitation
and environment) that requires resources of around R $ 2.5 trillion.
2) Public / private partnership in the execution of economic and social infrastructure
works.
3) Elaboration of an industrial development program that replaces imports and is aimed
at exports to reactivate the Brazilian economy.
4) Raising public savings by increasing public revenues and reducing government costs
so that it has the resources to invest in economic and social infrastructure.
5) Increase of the public collection with the taxation of the great fortunes, the dividends
of individuals and the banks.
6) Reduction of government costs with the elimination of superfluous expenses in all
the powers of the Republic and the reduction of public agencies and commissioned
personnel
7) Drastic reduction of bank interest rates to encourage private investment in economic
and social infrastructure works, industry and the economy in general.
It is important to note that Brazil's largest economic leverage is the infrastructure sector
that will most quickly lead to the recovery of the Brazilian economy. Emphasis should
be given by the Brazilian government to raising the rates of savings and public and
private investment to invest in the growth of the national economy. Domestic public
debt and mass unemployment will therefore only be overcome by adopting the
measures described above in order to prevent the collapse of the Brazilian economy and
reactivate them to eliminate or significantly reduce unemployment in Brazil.

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* Fernando Alcoforado, 78, 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 13 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.