Galipolo says that Brazilian economy has a series of ‘cross, wicked and regressive’ subsidies’

The president of, said on Tuesday, April 1, that the Brazilian economy has a series of cross, wicked and regressive subsidies. The statement was made during a solemn session of the 60th anniversary of the municipality. “It’s natural, everyone would like to have the best of both worlds. Everyone would like to be able to receive the benefit on both sides, but it is up to us, also from the Central Bank, to explain, to better discuss these issues with society. This is one of the main challenges of monetary authority, this theme of communication,” said the BC president.

Galipole emphasized that the theme is “absolutely new” to the monetary authority until the mid -1990s. “Even the monetary authorities of the world’s main economies did not even communicate their decisions of monetary policy, which are growing topics that impose the Central Bank’s challenge to talk about monetary policy,” he said. For the BC president, communication is almost an art and needs to be done beyond financial agents. “Monetary authorities are increasingly dialoguing with the broader public. Not only on monetary policy, but on many other topics: stability, fighting fraud, blows that affect millions, regulation, legal changes that can affect and can affect millions of people,” he said.

In this sense, according to him, it is “absolutely welcome that the monetary policy institution is gaining more and more space in public debate”. Without citing the name of the President of the Republic, who usually comments on interest policy, nor deputies who preceded him at Tuesday’s event and who were critical to BC Galipolo’s monetary policy stressed that elected public persons have the right to comment on the work of the Central Bank Monetary Policy Committee. “This is essential, it is important and it is obvious that it is legitimate, especially for those who were democratically elected. Those who were democratically elected has all the right,” he said.

“Eventually, you need to give higher doses of the medicine”

The president of the Central Bank also said that it is possible that the transmission channels of the monetary policy of Brazil do not have the same fluidity as in other countries. This can explain why the country needs higher interest rates to control inflation, he argued. “Eventually, you need to give higher doses of the medicine to get the same effect,” Galipolo said during a session. The head of the monetary authority tried to counter criticism from deputies who, during the session, requested the reduction of the Selic rate minutes earlier, Luiz Carlos Hauly (Somos-PR) had said that it would not make sense of Brazil to have interest of 14.25% per year, against 5% in the United States, and said it would be “unacceptable” Galipolo to follow the same methodology of former BC President Roberto Campos Neto.

The current president of the BC said that in international literature and conversations with other central bankers, the main question is how Brazil may have interest that would be high for many countries and yet have a dynamic economy. He recalled that, recently, unemployment fell to the lowest level of history in the country, and families’ performance grew to the maxims.

Galipolo cited the structure of subsidies of the Brazilian economy as one of the explanations for the malfunction of the transmission channels. “We have a number of cross, wicked and regressive subsidies in Brazilian society. And perhaps for us, these trade-offs, as we often call, these burden and bonuses, these exchanges, are more evident,” he said.

*With information from Estadão Content
Posted by Fernando Dias