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Brazil: Spend now, pay later!

Rafael Herzberg's picture
Consultant energy affairs, Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

  • Member since 2003
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  • Feb 17, 2023

Spend now pay later!

The news we read in the main vehicles point to a prevailing desire to open up Brazilian public coffers to make a list of "projects" of political interest viable.

This initiative is "anchored" in a broad coalition of parties, regardless of their "orientation". For everyone, having a bigger spending budget is the best scenario. As always!

Spinning the machine to produce more money, to "mitigate" the associated budget overrun, is a well-known consequence that systemically devalues the purchasing power of the population, in the sequence.

Brazil follows exactly what economists recommend NOT to do: "use your credit card to buy now and pay later at an exorbitant cost (one of the highest global interest rates) ".

Unfortunately, we don't have anyone who defends a sustainable situation. After all, for our leaders, what only counts is now. Not the future.

And so we don't have realistic expectations of a leap in GDP/capita.

The electric power sector being a capital intensive one is directly impacted as ongoing interest rates being so high do have a very important effect on the amortization costs of the whole power supply chain (generation, transmission and distribution). 

In other words: Brazilian projects end up costing more than elsewhere. That's super bad regarding the much needed competitive level.


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Thank Rafael for the Post!
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