The Correios rescue appears to have become a disaster even by the wasteful standards of the economic zone of the government of Luiz Inácio Lula da Silva (PT). As reported BoundThe intended loan of 20 billion Brazilian reais was suspended on Tuesday (2) due to resistance from the National Treasury.
He could. To attract the participation of the Bank of Brazil and four private institutions, the Workers’ Party administration wants to obtain the approval of the Treasury. In plain English, in the event that Correos defaults, a very likely event, which has accumulated losses in the first nine months of this year alone amounting to R$6.1 billion, Brazilian taxpayers will have to pay the debt.
Even with the guarantee, banks are still charging a rate close to 136% of the commodity exchange rate, which now hinders understanding. In such circumstances, a Lula government, which flaunts against rentiers and contributes to sky-high interest rates, would provide companies with a great deal of gain with little or no risk for financial institutions.
But there is more. It is reported that Planalto will have to reduce the target results of the federal state-owned enterprises to absorb the impact of the funds that will be buried in the bankrupt state-owned enterprise. There is no official confirmation at the moment, but it is quite possible that there was another error in the company’s crisis management.
The logic behind this idea, after all, is the same as that behind many other ideas implemented by the Labor administration to evade the necessity of containing budgetary expenditures – which demoralized the supposed fiscal framework less than two years after it came into effect.
The postal loan will turn into expenditure and thus further public deficit. In such circumstances, the executive authority must compensate for this additional deficit by reducing its spending by an equal proportion. However, Lula is not encouraged to do so, especially in the 2026 election year.
Hence the proposed solution is simply to ease the fiscal target for SOEs next year, which in fact is not austerity at all – a deficit of R$6.75 billion, not including interest payments or R$5 billion in PAC investments.
For its part, the federal government includes in next year’s draft budget a deficit exceeding R$23.3 billion, which, thanks to a large number of exceptions and special rules, will be treated as a surplus in the Finance Ministry’s fictional accounting. This is of course if expectations are justified.
In a calculation that cannot be manipulated by inventions, public debt has already jumped, under this third Lula government, from 71.7% to 78.6% of GDP, which is equivalent to 9.9 trillion Brazilian reais, an astronomical figure.
Until the end of the term, Curios will help increase this number. It is the result of the original mistake, in the name of statist corporatism and political appropriations, of removing the company from the privatization program and handing it over to the desires of the Labor Party and the Centre.
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