Economist Simao Silber says the new framework is a “midsummer night’s dream”.

The main criticism is that the new rule is based on the dubious assumption that Brazil will see an increase in revenue this year

Roberto de Lira

March 30, 2023 6:04 PM – Updated 2 hours ago

Shakespeare. This was the definition that Simão Silber, economist and professor at FEA-USP, found in an interview with Infomoney, to define the declaration of the fiscal framework by Finance Minister Fernando Haddad. According to him, to believe in or even approve of the implementation of the new rules by the National Congress is “A Midsummer Night’s Dream,” a reference to the famous play by English playwright William Shakespeare.

The main reason for the economist’s criticism is that he starts from the dubious assumption that Brazil will see an increase in revenue this year. “There is no guarantee that the economy will perform this year,” he said. “The big drawback is imagining a huge increase in revenue that absorbs an increase in expenses and money.”

Thus, the declared rule that 30% of revenue growth should be used to pay off public debt, a kind of “protection” in times of crisis, becomes, in Simao Silber’s opinion, “a very unlikely, even impossible thing”.

It was disappointing to see “the mountain give birth to a mouse so tiny and generate so much buzz,” Silber said of the ad. “It’s ‘wishful thinking’ (positive thinking). I’d like it to work, but we have to acquiesce in reality,” he declared.

In addition to believing that the new rule is not in effect, the economist also claims that it will not be approved by the National Congress. He states that both the House of Representatives and the Senate have competent economic advisers who should assist in the debates to indicate that this proposal will not succeed.

Regarding the possibility of an unexpected increase in revenue, albeit a modest one, the economist claims that this will only happen through higher inflation, due to natural higher taxes on nominal income and wages, for example.

But it does not generate enough revenue to generate the imagined revenue. There is no miracle, no more commodity booms, the international environment is bad,” Silber said. He reiterated that higher revenue needs higher GDP growth, but the economy needs to grow and that is not on the horizon.

He also doubts that the current composition of Congress agrees to any increase in the tax burden or that the tax reform proposal that will be sent to parliamentarians can help the discussions.

And tax reform, as proposed, increases the burden of sectors like services exponentially. From there you will enter the “lobbies”. He also warned that the government had no scope to approve the reform.