Fernanda Guarda, chief economist for Latin America from BNP Paribas, says that public debt will increase over the next 10 years
BNP Paribas’s chief economist for Latin America, Fernanda Guarda, says in an interview with Poder360 that the measures of the Government Fiscal Package (PT) were insufficient to balance the public accounts.
According to the expert, the interest curve is on high levels because of other countries. He stated that fiscal policy helped boost consumption and hindered the work of the Central Bank to control inflation.
Fernanda Guarda is 45 years old. He has been a chief economist for Latin America from BNP Paribas since August 2024. She has been director of international affairs and corporate risk management of the Central Bank from 2021 to 2023 by the Government (PL).
She is an economist and has a doctorate in economics from, where she has also taught. It has a consolidated career in the financial market, having worked as a chief economist and senior economist in several banks and managers.
The interview was recorded by video conferencing on Thursday (8.MAI.2025). Watch (29min54s):
Read below excerpts from the interview:
Power360 – Was the Lula government’s fiscal policy that disrupted the driving of the Central Bank’s monetary policy in recent years?
“Fiscal policy has undoubtedly helped sustain consumption at stronger levels of growth. The new minimum wage policy has translated into higher adjustments. We had readjustments that were really due. It had been a long time since functionalism had no readjustments, but it also helps consumption. There were several initiatives that acted to support growth and help in this result of a stronger growth rate. […] The ideal, from the point of view of macroeconomic arrangement, is that we can have this help from fiscal policy, a slowdown in the pace of spending to help the work of the Central Bank going forward”.
Was the fiscal package sent by the government at the end of 2024, was sufficient to balance the public accounts? What should still be done?
“The late 2024 fiscal package was an important and very welcome development to limit the growth of expenses within the budget, including the limitation of the actual readjustment of the minimum wage that was proposed at that time. But it was not enough to limit the pace of growth growth in order to ensure the type of result that is necessary from the point of view of sustainability of public policies. We expect a deficit of about 0.7% of GDP next year, considering everything that will end effectively impact the trajectory of public debt. We also had the announcement of this measure that is now being appreciated by the Income Tax Exemption Congress up to $ 5,000 which generates an additional compensation need that is not yet clear what this compensation will be and that can have an impact on public accounts as well. From the market point of view, enough measures have not yet been taken to ensure that Brazil is in a trajectory of primary surpluses compatible with the stabilization of public debt”.
There is the issue of precatory that in 2027 it is not yet known how they will enter the budget. Is it a theme that is urgently for the government? What should the government do in the coming months?
“This discussion will end up imposing itself anyway because it has to be present at least in the budget in the (budget guidelines law) next year. […] I believe the Ministry of Finance is aware, these discussions are happening. There are several possibilities, I don’t know what the preferred is right now. But I think it is a discussion that will impose itself, because either this payment of precatories will be present in the budget of 2027 or some other measure will be taken to address it outside the budget, throwing these payments forward as has been made in the past. Although not such a present discussion now, it will need to happen at some point. ”
Brazil spent R $ 935 billion on debt interest rates from one year to March. Even with this greater growth of GDP in recent years, is this level sustainable to the Brazilian economy?
“I always like to think about the debt in the perspective of its components. Public debt has 3 great dynamics for us to think. To 1st and the level. The level you are starting from public debt. The 2nd is what your debt service is. The interest that is charged on this debt. In 3rd place, what is the dynamics of the need for government financing, which is the additional debt you need every year. Brazil begins 2025 with 77% of Gross Debt GDP. It is about 20 percentage points above average of emerging countries. […] Brazil is already an emerging country with high GDP debt level. It starts from a not so good scenario. In 2nd place, we have the debt service […] Since anyone who has tried to borrow money from bank knows, the greater your debt, the higher your risk, the higher the interest the bank charges you. We observed that the interest curve follows on very high levels, because the Brazilian debt is very high. When you look at the interest curve, it is around 14%, losing sight of. […] The scenario we have for Brazil in the next 10 years is a scenario of increased public debt in relation to GDP ”.
How should this whole international trade war movement end? What will be the impact of these tariffs on the Brazilian economy and also on the global economy?
“As it will end I can’t tell you. This is one of the great uncertainties of the moment. It is the big topic of discussion in all international forums I go. It’s the big question. Where are we going? We have some indications of what awaits us in the future. President Trump has been hitting a lot on the key that he wants to make new agreements, which he will persevere on this path of having at least a minimum rate of 10% and persevere in this sense of reducing the connection with China. This will generate incentives in the world for some production chains to be redesigned. And during that Process there is inevitably a certain loss of efficiency ”.
Her position as Director of International Affairs and Corporate Risk Management was filled by a man in 2024. There was a decrease in the number of women in the Central Bank board. Do you evaluate that there is a loss of diversity there in the copom?
“It’s a mathematical issue, we’ve had two women, now there’s one, but I think it’s important to stress that the director which replaced me, is an exceptional person, a very competent economist. He is a very good person and I think this is very important, that we have good and competent people. It is important that we have women on the central bank board too, I think it helps a lot in the discussion. I’m sure that in the future we can have more ”.
