The document discusses the economic challenges facing Brazil under the Michel Temer government, highlighting the need to address chronic public account deficits and combat economic stagnation. It argues against attributing excessive spending to social security, education, and health, pinpointing the massive public debt as the primary issue and advocating for fiscal adjustments, including increased taxation on the wealthy and banks. The author calls for a proactive national development plan to foster private investment and mitigate external vulnerabilities, emphasizing the importance of capital control in promoting economic stability.

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PEC 241 THREATENING THE DEVELOPMENT OF BRAZIL
Fernando Alcoforado *
Every government of a nation has the responsibility to promote economic growth to
raise the levels of employment and income that results in the well-being of its
population, as well as to create the environment conducive to investments in productive
activity. In order to achieve these goals in order to promote Brazil's development, the
Michel Temer government should urgently solve the problem of chronically deficient
public accounts and combat the economic stagnation that threatens Brazil's future.
What is the problem with public accounts? 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 and amortization on public debt. It is false to attribute spending to
Social Security (21.76% of the Union budget), Education (3.73% of the Union budget)
and Health (3.98% of the Union budget) as those responsible for excess spending. The
main problem of the country is the public debt that requires immediate solution. To
reduce the size of public spending, it is necessary to reduce interest payments (R$ 695
billion) by renegotiating with creditors the lengthening of the payment of public debt so
that the federal government will have the necessary resources for its investments.
The real fiscal adjustment that should be adopted to solve the problem of public
accounts in Brazil at the moment would contemplate, on the one hand, the increase of
the public tax collection with: 1) taxation of large fortunes with assets over R$ 1 billion
that could yield approximately R$ 100 Billion per year; And (2) an increase in the tax
on banks whose profits have been stratospheric and, on the other hand, to reduce
government spending by: 1) drastically reducing the number of ministries and public
agencies and spending 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 of interest and amortization of public debt.
Recession or economic stagnation is the name given to the period in which the economy
of a given country undergoes a significant decline in its rate of economic growth, that is,
when there is a decrease in economic activity in general like what happens at the
moment in Brazil. Technically, this phase of contraction of a country's economic
activity is only considered a "recession" if the situation continues for two consecutive
quarters. As a consequence of this period of decline in GDP, the country faces a decline
in consumption and production, leading companies to invest and produce less. Finally,
there would come the so feared mass unemployment that would lead again to the
decrease of consumption as it has been happening in Brazil.
In order to combat the recession, there is a need to increase production activity in
general, which will only take place with the indispensable reduction of interest rates
practiced by the financial system, the tax burden and the cost of the country's energy
and transportation logistics. (1) the Central Bank acts 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 raise household consumption and
private investment; 2) the federal government reduces the tax burden (33% of GDP) by
reducing its interest payments (R $ 695 billion) of public debt (R $ 3.7 trillion) by
renegotiating with creditors the lengthening of its payment; And, 3) the federal

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government encourages the private sector to invest in energy, transportation and
communications infrastructure (R $ 1.6 trillion) to reduce the cost of its logistics.
It can be said that the measures adopted by the Michel Temer government are timid
because the Constitutional Amendment Project (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, in addition to To deepen the recession. No measures were
proposed by the government Michel Temer to combat the economic stagnation that
tends to deepen in the next years. 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.
Government leaders in Brazil need to understand that in an exceptional situation like
this there is an imperative need to plan 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 resumption of the
development of Brazil that beckons for the population and for the productive sectors a
perspective of resumption of economic growth. Instead, the Michel Temer government
adopts a neoliberal economic policy that abdicates the intervention of the Brazilian State
in the economic environment differently from the successful developmental 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 lack
of a development plan one of the factors that lead to the immobility of the private sector
in making investments in Brazil leading to a real paralysis.
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.
* 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

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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) .