Former BC president says a new pension reform is necessary and that priorities for public spending is “wrong”
Armínio Fraga, economist and former president of (Central Bank), defended freeze the minimum wage for 6 years. The measure would be fundamental to better social security accounts, which get worse scary, he said. Stated that the priorities of public spending in Brazil are “Completely wrong”.
Fraga participated on Saturday (12.abr.2025) event held this weekend at Harvard and MIT University (Massachusetts Institute of Technology), in Cambridge, in the United States. Armínio Fraga was president of the Central Bank from 1999 to 2003.
Fraga said the social security bill, responsible for the payment of retirement and pensions of Brazilians, is worsening “Frighteningly”. He stated that the picture of imbalance tends to get worse for both the demography of the population, which has become older, as for current rules, which need to be redone, he said.
“I think you need a renovation big. A good one would probably be easier to freeze the minimum wage in real terms. Six frozen years would already help”Said the former BC president.
The minimum wage is used as a reference for retirement and other social security and social benefits, such as salary allowance, BPC (continued benefit benefit) and Bolsa Familia.
Reform and subsidies
Fraga signaled that it is also necessary to attack the account of the Brazilian State salary, including all civil servants of federal entities (Union, States and Municipalities). He said the problem is more regional than federal, but has high financial impact.
The economist said social security and civil servants totaling 80% of primary expenses. For him, costs should fall to 60% to 80%.
“The Brazilian state needs to go through a renovation process, the Brazilian state, radical. There are many people in leadership […]in higher positions in the state, they are winning, in dollar, […] If you earn $ 50,000 [por ano] It’s a lot. People who run a tremendous risk and work like crazy. There is a huge space not only to save, but to improve ”he declared.
Fraga also said that tax spending – considering subsidies, or tax waiver to benefit economic sectors – cost 7% of GDP (Gross Domestic Product).
“At the end of the government Fernando Henrique Cardoso was 2% or 3%, so we have to look for all this money to have a normal interest rate in Brazil and also to spend better ”defended.
The high spending scenario makes Brazil less than 2% of GDP intended for public investments. The level was once 5%, according to the former BC president.
Armínio Fraga compared the Fiscal Framework – Sanned in August 2023 by the Government (PT) to replace the spending ceiling – with a Ferrari running at 300 km/h: “Will beat”.
Public Debt Interest
The economist estimates that the Brazilian economy should grow faster than the United States, because it is a market that has more opportunities for profitability. He stated that it is necessary to stop borrowing money, in government bonds, to pay debt interest.
The consolidated public sector – formed by Union, states, municipalities and state – spent R $ 910.9 billion no. The annualized nominal deficit (which includes interest spending) was R $ 939.8 billion in the month.
“The importance of the tax thing is not ‘a situation that today displays unsustainable symptoms’. […] Today in Brazil you can make an application in a government title and you will win, [título] in 30 years, inflation plus 7.5%”these. “Brazil should grow 2 points [percentuais] above [do PIB] of the United States. In the last 40 years, it has grown almost 1 point below”He added.
For him, it is not enough to create an environment of “Financially sustainable situation“. It is necessary to go further, according to the minister, because the priorities of public spending in Brazil are “Completely wrong”. Fraga said expectations for the APCA (National Consumer Price Index) indicate inflation above 6%. “The country grows 2%, or 2.5%. It is paying 7.5% in a debt that is large. It doesn’t have to be any Fields medal winner to know that this account doesn’t close ”said the economist.
Fraga said the fiscal theme is important, but has pointed out that there are other problems that have equal or even greater weight. He cited organized crime, social inequality and education. It signaled that these are the challenges of the executive.
Criticism to the USA
Fraga stated that Brazil is a country with western values. He said the cradle of these values is Europe, but the United States has taken the role of protagonist in the last 2 centuries. He criticized the way US President Donald Trump (Republican) has criticized business partners.
“We have to at least be together, but when I see the president of the United States mistreating and humiliating Canada and Mexico, I get a little scared”these.
The economist said that “There is nothing left”From the global order, born in Bretton Woods (1944) agreements, according to him. For Fraga, there are no civilized discussions to advance in international organizations. He stated that Brazil is a country that has diversity in economic relations and needs to continue this policy.
The former president of the BC said that, on the themes of values, the country has to maintain “A certain independenceAnd stay more “careful”In their positions to have a democratic, liberal and supportive discourse.
“Brazil over several years has been showing a certain bad taste in its international relations, a certain third worldism and a certain tolerance to large and small dictators ”said the economist.
