The president of Verde Asset Management, Luis Stuhlberger, who manages R$ 55 billion in assets, does not believe that Brazil is about to see the dollar reach R$ 6 (today at R$ 5.25) or the Selic rate at 10 % (currently at 5.25%).
“There are no economic reasons for that”, he said this Thursday (26), during his participation in the Expert 2021 virtual event, promoted by XP Investimentos.
“This will only happen if there is an escalation of very strong political tension,” said Stuhlberger, who participated in the event alongside the manager of the Multimarket Strategy and Pension Plan of Verde AM, Luiz Parreiras.
“Everyone who has money, like the two of us [disse, referindo-se a Parreiras], or people in the financial market, who are guided by logical reasoning, have great difficulty in understanding President Bolsonaro’s strategy of escalating tension with the Judiciary,” he said. “It’s not much use preaching to converts,” he said, referring to the portion of the population that supports the President of the Republic.
According to Stuhlberger, the first spontaneous polls of intention to vote pointed 24% for Jair Bolsonaro and 24% for ex-president Luiz Inácio Lula da Silva, with 52% undecided. “Now we have 24% Bolsonaro, 29% Lula and 36% undecided. A part of those who were undecided went to the blank or null vote”, he said.
“In other words, this tension created by the president distances from him the anti-lula voter, who voted for Bolsonaro for supporting the economic agenda and against everything the PT has done in Brazil, especially during the Dilma Rousseff government,” he said.
The manager said that he does not know how much this situation of confrontation between the Judiciary and the Executive “will get worse before it gets better”, but he believes it will be very difficult for the Tax Reform to be approved.
“Reforming with a weak president and hostage to the center will become a very dangerous business in Congress, with lobbies from all sectors. Nobody wants their sector to be harmed, but it is impossible to make a reform to take what everyone has today and be from there for the better”.
For the manager of the Verde fund, “this notion of justice and patriotism” defended by the Minister of Economy, Paulo Guedes, is “true”. “But we think that this moment is not ideal”, says Stuhlberger, who has doubts about the effectiveness of the taxation of dividends, one of the reform proposals that generated the most controversy in the business and financial world.
“I don’t have much idea if this [imposto sobre dividendos] will help Brazil a lot. What would help Brazil a lot would be the tax simplification, proposed in part of the PEC [proposta de emenda à Constituição] 45, without burdening the services sector”, he said. “I think this reform would be a reform with less complexity. What is litigation in PIS and Cofins in Brazil is a thing of a trillion reais”.
Asked about the administration of Economy Minister Paulo Guedes, Luiz Parreiras stated that the minister “is good in theory and slogan and bad in execution”.
“The liberal discourse is very good when it comes to privatizations, but the execution and political negotiation, the management of the reform process have left a lot to be desired”.
Breaking the spending ceiling will be “the mantra of the electoral campaign”, says manager
According to Stuhlberger, until recently, Bolsonaro was from the center, but he adopted “an economic and political proposal from the Tupiniquim extreme right, apprentice of Trump” [ex-presidente americano Donald Trump]. Now the president is trying to enact “populist proposals”, such as the Bolsa Família at R$ 400, expansion of the number of families, gas vouchers, subsidized diesel for truck drivers, breaking the spending ceiling. “That would be something for Lula to propose, at the end of next year, during the campaign.”
“Even if these populist proposals do not materialize, the market is starting to get a bit worried”, says the manager, for whom breaking the spending ceiling will be “the mantra of the 2022 electoral campaign”.
“Lula was popular because public spending rose by 6%, above the IPCA, every year. Why did Brazil do so well at that time? Because the collection went up 8% while the expense went up 6%. You had gains such as the boom in commodities, formalization and credit that made the acceleration of GDP and revenue a unique phenomenon in the country’s history. We will not see this again”, he stated.
For Stuhlberger, Lula will inherit a Brazil in which the ratio of the cost of the basic food basket to the minimum wage has doubled compared to his government. The candidate’s approach to the center can bring some tranquility to the market, in the manager’s opinion, while keeping the Central Bank independent and appointing a good finance minister.
“It would be good premises [para Lula] say that the roof will be broken if the storeroom goes up. Or that investments will stay out of the ceiling. And, of course, to do away with these premises of eliminating the reforms that were made”, he stated.
Parreiras, on the other hand, believes that the election that will define the next president of the Republic is still a long way off. “People are too convinced that the election will be Lula versus Bolsonaro. I would say that the scenario is much more open”, he said, giving as an example the last presidential election in the United States, in November 2020, won by Joe Biden.
“In August 2019, Biden was out of the deck. People are underestimating the space of the imponderable”.