The far right and hegemonic media are preaching “economic terrorism on the population,” emphasizing increased public spending and reinforcing the idea that Brazil's economy is struggling. It's a “false scenario to justify reducing social spending.” This is the assessment of Fábio Sobral, professor of economics at the Federal University of Ceará (UFC) and guest on the Brasil de Fato Três Por Quatro podcast this Thursday (13).
In this week's episode, broadcast live on Brasil de Fato's YouTube channel, journalists Nara Lacerda and José Eduardo Bernardes spoke with Sobral and Juliane Furno, an economist and professor at the State University of Rio de Janeiro (UFRJ), about public spending, investment, and the consequences for Brazil's economic health. [To watch the video produced in Portuguese, you can change the subtitles to your preferred language by clicking the right button on the platform]
Furno points out that “cutting spending doesn't lead to fiscal balance” and that any reductions resulting from fiscal austerity measures directly affect the lives and well-being of the population, especially the poor, which is reflected in the results of the Gross Domestic Product (GDP).
"When Brazil adopted a more 'austerity' and neoliberal logic from 2016 onwards, blaming the economic crisis on excesses, especially in public spending and state activism, the so-called 'Spending Ceiling Law' was instituted. This law, even included in the Constitution, aimed to solve the fiscal imbalance problem by cutting spending. The result was that the country's fiscal imbalance increased,” he recalls.
In this context, Sobral explains that the increase in public spending, especially on health and education, only reinforces how “the government only wins if it spends,” since investing in the population stimulates the economy and reflects on social and economic well-being throughout the country. “As the government spends, it promotes a kind of chain reaction, where other sectors start to produce and collect taxes,” the professor says.
Furno argues that the attempt to associate social spending with financial mismanagement ignores the positive impact these investments have on the economy. "When social spending is cut, tax collection also falls because less money circulates in the economy, directly affecting consumption and production," points out.
Sobral also highlights the contradictions of the Brazilian government, which invests part of its resources in debt securities issued by the United States. “We are responsible for sustaining US government spending. They want to reduce spending on education in public schools and public hospitals. The Central Bank bought American public debt bonds, and these funds help finance the bombs that fall on Gaza and southern Lebanon,” he says.
The economist also suggests that while the country indirectly contributes to financing the US budget, which includes military spending, “Brazil continues to struggle to invest in infrastructure, education, and health for its population.”
How exports influence food prices
In addition to the direct impact of social investments, food prices have become one of the government's main challenges. The constant rise in essential items, such as coffee and rice, has been driven by both climatic factors and strategic decisions made by agribusiness. “Agribusiness has chosen to export goods rather than prioritize the domestic market,” says Juliane Furno.
According to Furno, this decision results in high prices for Brazilian consumers, as national production remains tied to international prices and the dollar's appreciation. “The priority has to be the domestic market and satisfying our society's hunger,” she argues.
The agribusiness Caucus has a strong presence in Congress and exerts significant power in national politics. As a result, they influence decision-making that affects everything from international transactions for the commercialization of inputs produced in Brazil to ensuring, or failing to ensure, food in Brazilians' pantries and on their plates.
Sobral explains that rebuilding a supply policy is essential to prevent the foreign market from continuing to dictate food prices in Brazil. "We need to rebuild this food storage system and offer financial support to small-scale production, ensuring jobs, income, and stability. Agribusiness receives billions in subsidies, but family farming, which truly feeds the population, is left helpless."
This "food chaos," as the professor illustrates, is endorsed by the stance of macro-producers in agribusiness, who prioritize exporting their products and marketing foods such as coffee and soy internationally without ensuring a minimum domestic supply.
Furno adds that one of the ways to ensure the supply of basic food to the poorest sections of the population “could be the implementation of a ‘quota system’ to limit exports based on Brazil's domestic needs.”
Edited by: Dayze Rocha
