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The current administration received the State with a default of R $ 34.5 billion, saw paralysis in the mineral sector and the rains before facing the new coronavirus.
The coronavirus pandemic, which should eliminate at least R $ 7.5 billion from the collection of the main state tax, the ICMS, by the end of the year, in addition to increasing expenses at rates not yet known, occurs at the end of the year . as a result of a series of financial setbacks that Governor Romeu Zema (Novo) faced since taking office. If before the pandemic it was already difficult to rebalance the accounts, experts now point out that there are no forecasts for Minas to end the year again.
Even before assuming the government, Zema received Minas Gerais with a deficit of R $ 34.5 billion left by former Governor Fernando Pimentel (PT), who handed over the State with the 13th 2018 salary open. Weeks after taking office, the Minas Gerais government faced the rupture of the Vale mining company dam in Brumadinho. According to Izak Silva, economist at the Federation of State Industries (Fiemg), the impact on the collection was great.
It mentions that in 2018 the production of the mining industry in Minas Gerais was approximately 230 million tons (of which the extraction of iron ore represents 80%). In 2019, that total fell to 130 million tons.
Despite all the measures taken, such as the administrative reform, which extinguished nine secretariats (the government was 21 years old and changed to 12), the state’s finances were always in the red during 2019. So much so that the deficit for the 2020 Budget it increased R $ 1.9 billion in two months, to R $ 13.2 billion. In addition to the gap inherited from the previous administration, the State began 2020 with a total deficit of R $ 47.7 billion.
The year has barely started and Minas faced the heavy rains of January, which affected hundreds of cities, with direct impacts on the economy of the municipalities and also on the State. Two months later, the State, like Brazil and the world, was plunged into a crisis unprecedented in recent history.
In a statement through the social network last Thursday, Zema himself acknowledged the difficulties and said that the situation was catastrophic. “For a State that already had a deficit forecast for this year of R $ 13 billion, and that this deficit will increase another R $ 7.5 billion, it is a situation, I would say, critical, if not almost catastrophic.”
Experts heard by TIME Point out that the situation is alarming. In its evaluation, it will even be necessary to review part or all of the banner that until then had been defended by the economic team of Palácio Tiradentes: adherence to the Federal Regime of Tax Recovery (RRF) and the sale of state companies as a form of raise funds to cover state expenses.
“After the moment of emergency spending (due to the pandemic), the conversation (between the government and the Union) will most likely return. But this moment of uncertainty is very great, we do not know how the federal government’s fiscal policy will be carried out ”, analyzes Rafael Ribeiro, professor of economics at the Federal University of Minas Gerais (UFMG).
The expert says that even before the pandemic, Minas’ adherence to the RRF was already questionable, and says that it will be necessary to analyze the economic and fiscal narrative after the crisis. “After the pandemic, we have to see how the correlations of the political forces will accommodate, to know which pressure groups will be stronger or not. It is not possible to know, today, whether a narrative in force before the pandemic, more favorable to fiscal adjustment, will have the same force at the time after the pandemic. ”
Coordinator of the Ibmec administration course, Eduardo Coutinho agrees in parts. “The resource of any federal entity has a single source: the collection of taxes. If you have insufficient income, you need to find a way. You must match spending to revenue, and that is inevitable. The issue of fiscal adjustment will be even more emergent and important, because now it will have an additional problem, which is the worsening of government accounts. ”
Despite defending adherence to the RRF, the specialist makes reservations regarding privatizations. “They are an idea to eliminate activities of the State that are not up to them. This does not necessarily solve the fiscal problem, ”he says, and reinforces that the sale of state companies could only balance the accounts if the state had a large estate and could sell quickly. Still, this process would have to be accompanied by mechanisms that would prevent the fiscal situation from worsening in the future. It is a complicated equation ”, he warns.
Since taking office, Romeu Zema has been defending the sale of companies such as Cemig, Copasa and Codemig, the project that provides for the privatization of the latter was sent to the Legislative Assembly (ALMG) in November 2019, but has stalled since so. so.
Weather
Both experts point out that it is still too early to outline a scenario to emerge from the crisis. They point out that health problems must be addressed first, and Brazil has not yet reached the peak of new cases, according to government estimates. “It will depend on the economic recovery capacity of the activity as a whole. It depends on the freedom that you have to make adjustments to expenses, because compulsory expenses currently commit a large part of the total collection, ”observes Coutinho.
Other factors that will enter this equation refer to the situation of workers and companies. “If the federal government does not provide assistance to those who lost their jobs and stayed at home, many will die and, in addition to the loss of life, there will also be a loss of the workforce. Companies will also fall apart if they don’t have zero cost credit and make it available to them right then. If you have a loss of labor and capital, the recovery of the economy will be much slower, “argues Ribeiro.
Bottom of the well
Even with all the difficulties, experts were emphatic in saying that the situation in the mining economy may worsen further. “It is difficult to speak of a rocky bottom. It may be illusory and there may still be a drop, but (the crisis) puts (the State) in a very delicate situation, which will require an even greater recovery effort than that made in 2019, ”says Coutinho.
“Unfortunately, the lesson to be learned from the past few years is that the bottom never seems to come. Minas has little room for maneuver and what to do at that time, “adds Ribeiro, comparing the State to a family, which does not have the means to increase income and needs to readjust expenses.
“The government does not have autonomy to issue debt or print currency, like the federal government. So this question of how the state can get out of the hole goes through other cases, “he says, citing the future relationship with the federal government.
The report contacted the government to reflect on the matter, but did not return until the publication of this text.
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