The signs are that the forecasts for inflation and interest rates, foreseen for a reduction in the second half of 2023, will only occur in 2024, moving further and further away from the target of 3.25% and 3% for 2023 and 2024, respectively.
Despite not being part of the structure of powers, the autonomy of the Central Bank of Brazil (BACEN) (which many have criticized) becomes the most significant weight and counterweight in Brazil (at least in the real and current world).
And we are not discussing issues of ideology, but measures that are contrary to the reality of the facts.
In effect, the decision of the Monetary Policy Committee (COPOM) to maintain the basic interest rate of the Brazilian economy contrasts with the decision of the Senate to approve the notorious PEC (Proposal of Constitutional Amendment) of transition. So, the big question arises: should the technical or political data involved in these two issues prevail?
COPOM’s rationale for maintaining the current interest rate takes into account all the “insecurity of the future government’s fiscal policy,” as well as, at this moment, the fiscal effects of the approval of the transition PEC (nicknamed “PEC fura-teto”).
The signs are that the forecasts for inflation and interest rates, foreseen for a reduction in the second half of 2023, will only occur in 2024, moving further and further away from the target of 3.25% and 3% for 2023 and 2024, respectively.
So, what does this have to do with the Brazilian economy and the corporate world? As a direct answer, we will have some facts that will significantly impact Brazilian companies: the exchange rate at high levels, increased inflation, increased prices of products in general, and increased unemployment rate. But the main fact will be the increase in the tax burden (and there is no point in arguing that it will be solved with the supposed proposal of (sic) tax reform in the narrative discussion.
There is, and this is a fact, a link, a direct connection, between public spending, including the probably vaunted benefits, and the tax burden. They are Siamese siblings.
Therefore, we have long been warning our clients about the impact of efficient tax management on companies’ economic and financial results. It comes grounded in the inclusion in the companies’ strategies, especially in troubled times of the economy that lie ahead for 2023.
