Ipea announces proposals to accelerate development after pandemic

The Institute of Applied Economic Research (Ipea) today (22) the document Brasil Pós Covid-19, with a set of short and medium term proposals to accelerate the sustainable development of brazil post-pandemic, on a path of growth and development.
The work had the participation of researchers from all areas of the institution and the proposals are divided into four directions: productive activity and reconstruction of production chains, international insertion, investment in infrastructure, as well as economic and social protection of vulnerable populations.
"Ipea is fulfilling its role, which is to oxygenate the debate and present solutions. Ipea does not perform anything. The role is to propose and answer the questions of the sectors," said André Rauen, Director of SectorAl Studies and Policies for Innovation and Infrastructure at Ipea, in an interview with Agência Brasil.
Among the suggestions in the area of infrastructure, Ipea proposes that the federal government make an emergency program for the maintenance of federal highways, especially those that pass through cities that suffered the most from unemployment, one of the effects of the pandemic. For André Rauen, this is a faster way to give greater conditions to the local population. "We are using infrastructure maintenance to generate jobs and income," he said.
Also in this area, the document proposes the creation of a chamber to receive the different demands of the concessionaires in the sector. According to the researcher, the financial balance of these companies was negatively affected. "They are already negotiating with the government and Ipea proposes the creation of a single gateway to receive the demands and give a more homogeneous treatment to these numerous requests that are already coming.
"I think it needs to have the participation of more than one ministry, because it had a socioeconomic impact. The idea is that it be carried out between ministries, but the operationalization depends on how this can be worked in the federal government and whether the ministries will accept", he added.
Sanitation is also part of the proposals. The intention is to take advantage of the approval of the industry framework to create a vigorous program focused on irregular areas. "Bringing water and sewage to irregular areas, which are the communities of slums, raids, because these large population contingents are crowded and have a potential, as we have now seen in the pandemic, to spread disease if we do not bring basic sanitation," he said.
Another proposal is the incentive for private railway construction in the authorisation system. According to Rauen, this measure would have an immediate impact on the generation of employment and income. "Once it was allowed, for example, for large mining companies and large commodity producers to build their own railroads, they would go to hire more basic labor personnel, that is, that would be a direct impact of the important private concession for this time," he said.
The director of Ipea said that the proposals were drafted considering the scenario of fiscal restriction of the federal government, but added that one of the ways to get the money is to review policies that do not work. "In the social area, public money will be needed, but in general what we want is to get resources through the reorientation of existing policies," he noted.
In the area of public transport, the researcher said he considers that urban mobility is a super complex topic, which cannot be solved overnight and requires intense debate with a huge number of actors with different interests. "The way out that we give is the focus on reducing these problems with an evidence-based debate, because it is not trivial, but it is a complex problem, which even has health impacts, and an Achilles heel because of agglomeration," he said.
In the text of the presentation of the document, the president of Ipea, Carlos von Doellinger pointed out that in a few months, since the pandemic began, the country has moved from a reasonably promising scenario to the current context, in which forecasts indicate the possibility of shrinking the economy by up to 6%. "Of course there is great uncertainty about the exact magnitude of the drop in economic activity, but there is no doubt that it was considerable."
The most affected sector was services, which represents 70% of the national Gross Domestic Product (GDP). Following came the industrial sector, mainly the manufacturing industry, but in contrast the agricultural sector, by its own characteristics, still managed to maintain positive growth, although at a lower level than the forecasts of the beginning of the year.
The president of Ipea said that the complexity of the current context indicates that the country is experiencing a critical moment and, therefore, proposals for public policies and robust and objective evidence are critical inputs for short, medium and long-term government actions. "Our intention is to provide subsidies so that the government can plan the recovery of economic activity, with a view to improving the conditions of employment, income and living conditions of the most vulnerable populations, as well as to offer concrete possibilities of social protection and public policies of sectoral and regional promotion, and useful for the survival of companies, especially those most vulnerable due to the size and the sector of action."
In the view of Carlos von Doellinger, although there is a projection of a 6% drop in GDP in 2020, a percentage lower than the market average, from the second half of the year there is forecast of recovery of the economy, with a rise between 3.6% and 4.7% in the period, which is also above the market at both levels. For 2021, the expectation is for a growth of 3.6% of GDP, due to the low comparison base of the previous year.
The Director of Macroeconomic Studies and Policies of Ipea, José Ronaldo Souza Júnior, highlighted that given the current panorama of the impacts of the pandemic on the Brazilian economy, fiscal balance is a prerequisite for transforming this scenario. "We have today a fiscal imbalance and a very high deficit, but we need to project for the next few years because this adjustment will happen. It will only be credible on the basis of concrete measures in this direction, which need to be implemented in the coming months. Social spending is important right now, but you need to know which ones are being effective today and which are not."
The document argues that together with the necessary tax reforms, a broad set of micro-economic investment reforms and tax reform should be implemented, which would help improve the efficiency of the economy. "Tax reform is an issue that comes from many years and the faster it is approved, the better. This would hasten our move towards a more efficient economy and improve the perception of the Brazilian economy."
The document also proposes the granting of favored loans, with payment linked to future billing, and strategic use of public purchases, to foster the activity of micro and small enterprises. André Rauen said that it is necessary to recognize that these companies have been hit hard by the crisis and need urgent action. "We are proposing loans for all microenterprises, which will pay in income tax. There's no interest, just the main one. Either they are all supported, or there is no traction effect on the economy, and we need this effect for reactivation. We guarantee that there will be no default because it will pay when we declare income tax."
On purchases, the researcher said that the Executive Branch should create a market place gov space, as they do with the amazon and free market sales companies. "All offices can enter and negotiate with the client. For lower-value purchases, everything could be done through the market place, for routine purchases of basic supply," Rauen said.
In ipea's assessment, the external sector in Brazil was, in a way, preserved from the worst consequences of the crisis, with significant growth in exports, especially of products in the agricultural sector. There was a strong concentration in China's importing markets. But Brazilian imports contracted, which benefited the trade balance.
The Director of Macroeconomic Studies and Policies drew attention to the fact that direct investments were kept at a reasonable level, considering the crisis environment that the world is experiencing. "I would say that, in fact, the external sector is in a much better situation than the others. That doesn't mean you should relax," he said.
One of the proposals in this area is to stimulate the productive sector with activities that make foreign trade a vector of economic recovery. "Continuity of the agenda of economic integration with other countries, stimulating brazil's productivity and competitiveness, seeking international partnerships for new investments, especially in infrastructure and new production plants in the country," he added.
Ipea's proposals also include the creation of temporary subsidy programs for hiring workers and renewing work-time reduction programs. In addition, they suggest the extension of this measure, implemented in Provisional Measure 936/2020, with reductions in government expenditure on emergency benefits.
"The extension has a deadline and a set of ideas to increase the flexibility of the labor market and avoid layoffs. Right now, some companies are very insecure about how many hours and how many workers they need. The idea is to keep the job as much as possible, avoiding layoffs and making the resumption the fastest", evaluated José Ronaldo Souza Júnior, noting that actions and emergency aid from the government allowed the loss of jobs to be lower since the beginning of the pandemic.