The Brazilian government has become hostage to the financial system by adopting policies favorable to banks in order to save them from bankruptcy, contrary to the interests of the Brazilian population. Over 43% of Brazil's 2013 budget went towards paying interest and debts, surpassing spending on education, health, defense, and public safety. This is because the financial system has transformed from traditional banking into diversified conglomerates whose profits come from credit creation. The government needs to renegotiate debt payments with creditors to free up funds for investing in infrastructure and social services. Continuing on the current path will lead Brazil towards certain bankruptcy.

1. THE GOVERNMENT AND THE FINANCIAL SYSTEM UNITED AGAINST
THE PROGRESS OF BRAZIL
Fernando Alcoforado *
The global financial system is showing losses on a scale that no one ever predicted. The
world capitalist system is broken and no one knows what will replace it. The current
crisis is a product of changes that have been going on for several years. Half a century
ago, the banking appeared to be a relatively simple art. Banks have gone through a
transformation process in its core, leaving behind its classic function as an intermediary
between savers and lenders. Benefiting from the opening of the world economy from
the 1990s, these institutions have become diversified financial groups and
conglomerates whose profits come mainly from credit creation, which has become the
primary means of money creation. In this process, the central banks of countries have
completely lost control of their financial systems.
The cycle of expansion and accumulation of global financial capitalism ran into huge
global financial crisis that erupted in 2008 in the United States and the synchronized
slowdown in global economic activity. It is impossible at this point to know where the
world capitalist system is going. The great possibility of combining financial collapse
with a huge recession, if not something worse like depression, will certainly change the
world. From the outbreak of the global crisis in 2008, governments around the world
have become hostages of the financial system by adopting restrictive fiscal and
monetary policies favorable to banks to save them from bankruptcy, and contrary to the
interests of their populations. This is also the case of the Brazilian government that
succumbed to the domestic and international financial system.
It is unacceptable that the Brazilian government intended 43.98 % of the budget of the
Republic of 2013 for the payment of interest and repayment of domestic debt when
there is a compelling need for public funds to invest in precarious economic
infrastructure (energy, transport and communications systems) and social (education,
health, sanitation systems and housing). The pity is that the federal government
intended 43.98 % of the budget for interest payments and repayments of debt (R$ 985
billion), surpassing the resources allocated to education (3.34 %), health (4.17 %),
national defense (1.72 %) and public safety (0.19 %), among other items. The states and
municipalities, almost bankrupt, receive transfer of the Union (federal government) only
10.21 % of the budget of the Republic. In other words, the lion's share of the budget of
the Republic is for the payment of interest and amortization of domestic debt. This is
the reason why the Brazilian government at all levels (federal, state and municipal) does
not have the resources to meet their most basic needs.
If there isn´t a reversal of this framework, it will be enhanced with the passage of time
the imbalance between demand and availability of resources to meet the needs of Brazil
in economic and social infrastructure to the detriment of the population and the national
productive sector. For the Brazilian government have resources for investment in
economic and social infrastructure, have to renegotiate with the domestic and foreign
banks (creditors 55% of debt), mutual funds (21 % of the creditors of debt), pension
funds (creditors 16% of debt) and non-financial companies (creditors 8% of debt) the
reduction of expenses with the payment of debt service lengthening the payment of
interest and amortization of public debt.
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2. Well as providing resources for investment in poor economic and social infrastructure
in Brazil, the policy of reducing and lengthen the payment of interest and amortization
of debt would also aim to reverse the trend of explosion of domestic public debt in
Brazil that reached R$ 62 billion during the Cardoso administration, R$ 687 billion
during the Lula government and should reach R$ 2.24 trillion in 2013 as government
Dilma Rousseff. Trend continues, it will be dwindling resources available by the
government (federal, state and municipal) to invest in economic and social
infrastructure. In addition to the high expenditure on the servicing of public debt, high
interest rate Selic adopted by the Central Bank of the federal government, the fifth
largest in the entire world economy, as well as the growing public sector deficit
decisively contribute to the continued increase public debt in Brazil .
The policy adopted by the FHC, Lula and Dilma Rousseff government has been
characterized by debt refinancing which means renew overdue debts with new deadlines
and interest rate attractive to lenders, burdening taxpayers and of course throwing the
responsibility for the next government. The collusion of the federal government with the
interests of the financial system, which is making money like never in Brazil and in the
world, is that means there is continuous rise in interest rates Selic. In turn, the public
deficit grows continuously in Brazil because the Brazilian government increases its
spending inefficiently that to exceed their revenue impacting negatively on the
economic progress of the country, considering that reduces the ability of business
investment, as well as the of actual State.
The public deficit is equal to the portion of expenses incurred (government spending),
but which are not covered by revenues (taxes), whose main consequence is the
structural disorder of the economy that is recorded at the time. Using data from the Penn
World Table (one reliable source of information compared to the national accounts),
Brazil would have an excess of spending between 14 % and 26 %. Taxes, in turn,
correspond to 35 % of the GDP one of the world's largest. It should be noted that when
the Brazilian government incurs budget deficit, it seeks to make its coverage acquiring
internal and external resources by issuing bonds that are bought by private initiative,
especially by the financial system.
Even given the serious situation experienced by Brazil of a lack of resources for
investment in economic and social infrastructure and the possibility of uncontrolled
total public debt that jeopardizes the interests of the people of Brazil, the Brazilian
government maintains its policy irrationally very favorable economic and financial to its
creditors, ie the financial system. The continuity of this policy will lead to Brazil
certainly bankrupt economy. The Brazilian people have to mobilize to prevent this
scenario to materialize in the future.
* Alcoforado, Fernando, 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
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3. (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do
Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.
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