Economist and former Central Bank director José Júlio Senna has challenged André Lara Resende’s argument that high interest rates are the central cause of Brazil’s growing public debt. Speaking to CNN Brasil’s WW program, Senna said interest rates are neither the main explanation nor the only one.
Senna cited an empirical study by Fernando Holanda Barbosa Filho of the Brazilian Institute of Economics (IBRE), saying it found that the absence of positive primary fiscal results was the main factor behind the debt’s growth. He said the study was methodologically rigorous.
When public accounts do not produce a primary surplus, Senna explained, the government must issue new debt to cover the fiscal gap and interest costs. He said interest rates have an important influence, but should not be treated as the principal cause of the problem.
Senna also acknowledged Resende’s historical contribution to Brazil’s Real Plan, while saying that Resende’s ideas had diverged from his own. He said he did not feel comfortable agreeing with any aspect of Resende’s article, titled “Eu Acuso.”
Sources: CNN Brasil.