Thursday, 23 October
Recorded during the week of the IMF and World Bank Annual Meetings, this episode of Macro Matters features Joaquim Levy. As the world enters an era of multipolar competition and rising protectionism, Brazil has taken an approach defined by economic resilience, pragmatic diplomacy, and “Active Non-Alignment.” We’ll be discussing the drivers behind this recent growth, Brazil’s role within an expanded BRICS coalition, and its ambitions for greater global influence. Levy also shares his expectations for the 2025 Annual Meetings, his prediction for Brazil’s upcoming elections, and what Brazil’s trajectory can teach us about navigating today’s complex global economic landscape.
Joaquim Levy is Director for Economic Strategy and Market Relations at Banco Safra and former Brazilian Minister of Finance. With extensive experience spanning the World Bank, the Brazilian Development Bank, and other IFIs, Levy helps us explore how Brazil is positioning itself amid shifting global dynamics.
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Transcript:
Emily Slater: Welcome to Macro Matters, a podcast where global experts offer clear-eyed analysis on global economic policy. I’m your host, Emily Slater, executive director of the Bretton Woods Committee. Each episode, I sit down with BWC’s diverse network of members, from global policy makers to private sector leaders, to discuss timely topics in economics, geopolitics, and finance. In a media landscape full of noise, these conversations offer clarity. We go beyond the headlines to explore not just what’s happening in the global economy, but why it’s happening, what it means, and what might come next.
Welcome everyone. Welcome to this episode of the Macro Matters podcast, I’m so excited to have our guest with us today, Dr. Joaquim Levy, coming all the way from Rio de Janeiro, Brazil. We’re going to get into all things Brazil today on the podcast. We’re going to talk a little bit about Brazil’s growth trajectory. We’re going to talk about, of course, the global tariff environment and how Brazil’s navigating that and a changing geopolitical order. And we’re really going to talk about what Brazil’s ambitions are on the global stage.
So let me quickly introduce Joaquim, who is, of course, a member of the Bretton Woods Committee and on our advisory council and has been so gracious in leading a lot of our multilateral reform work in the past and our sovereign debt work, so we appreciate all that he does for BWC. But he’s currently the director for economic strategy and market relations at Banco Safra in Brazil, former managing director and CFO of the World Bank—which of course is where I got to know you, Joaquim—former finance minister of Brazil, former president of the Brazilian Development Bank. Just a policy and market background. You’ve really done it all in terms of your experience. So, no one better to talk through where Brazil is in the global economy today.
So why don’t we start there, Joaquim? Brazil’s had a pretty resilient growth story since COVID, really. Maybe a little bit uneven, but pretty resilient and a strong growth trajectory. So tell me a little bit about what you see as having been the main drivers of Brazil’s growth story and where it’s going from here—what you see in terms of its outlook as well.
Joaquim Levy: Okay, well, first, thank you. It’s great to be here. It’s great to be at The Bretton Woods Committee on the eve of one more annual meeting and discussions taking place here in Washington.
Well, Brazil, yes, indeed, has grown since ’21. I think that the main driver, really, for Brazil has been exports, both in terms of agriculture, and continuing to produce more, and with more productivity, more diversity of things. Really trying to explore the land, the available land, with all the caution about protecting forests and the other biomes, but really investing heavily on that, and with technology. We are blessed in Brazil to have the ability to get more than one crop a year, and without irrigation. Sometimes it’s almost like three crops, because in between crops like soybean and corn, then you can have the cattle.
So, this productivity, what you get from there, has been really a major driver of growth. Also, because agriculture involves a lot of other things. If the GDP of agriculture itself is not that big, when you think of all the technology, all the factories, the inputs that they need, you talk about 30% of the economy very easily.
There’s also, of course, production of oil. It’s a little bit like the US; we’ve been growing our production of oil. And then there’s the combination of two, which are all sorts of biofuels ranging from ethanol, a lot of biodiesels, biomethane and so on. And what is interesting, and we can talk a little bit about that later, is that in many cases, we get co-benefits from that. So, you get cheaper energy at the same time that you get more food and more jobs, and you even save in the distribution of fuel because you get the production of fuel closer to consumption. It’s very interesting because there is a combination of what we would call a circular economy, but not at a cost, rather, getting more efficient. And this is why I say this is one driver.
These, I would say, are the main drivers. Consumption is doing fine. It has been relatively strong for the last couple of years. This year will be quite more sedate because monetary policy has been quite tight in recent years. So, what we’d expect… yeah, we expect to continue to grow around 2.5%. This year it might be a little bit less, but on average, 2.5%. And as long as it’s sustainable, I think this is really what is needed in Brazil. We’d love to grow 4%, but that would be a little bit more challenging.
Growing at 2.5% is also important from the fiscal point of view because, of course, you have a huge social welfare system, and it requires some revenues and some growth to keep up with this. So, we’re growing well. The driver has been a lot of exports and—even consumption is doing fine, and in the last two years we have also got a little bit more investment, including investment in infrastructure. I’d say that it’s not an extremely dynamic, vigorous economy, but it’s, I’d say, broadly in balance.
Emily Slater: You mentioned monetary policy tightening, and the central bank was one of the first movers, I would say, in addressing inflation. Obviously, post-COVID, a lot of advanced economies and emerging economies were having to really address inflation. The US has been a little bit slower to move. What are your expectations for inflation targets in Brazil?
Joaquim Levy: Well, again, we’re approaching the target. The target is 3%, which nowadays is quite an ambitious target. Even the US is having trouble to get to 3%, let alone Brazil. But we are on the target. And then last year, for a number of reasons, there was a little bit of discomfort, and we got a huge movement in the currency, and depreciation of currency, from the second to third quarter. And then, of course, the last few months of the year, the dollar strengthened everywhere, and also strengthened in Brazil, which meant that we got a huge impulse because of the currency devaluation. The IMF, in the last Article IV, has estimated that if you didn’t have this run of currency in the second half of last year, inflation would have been stable at 4% and now going back, approaching 3.5% or 3%.
So, okay, bygones are bygones. The monetary policy reacted to that and some sort of discomfort. There was a change also in the governor of the Central Bank, so people wanted to be on the safe side. And then of course, we also have benefited from the appreciation of the real in the last few months with the weakening of the dollar. This has lowered the price of imports, and even the price of domestic food and other things that are priced internationally.
We’re probably going to get, by the end of this year, an inflation of 4.5%—a little beyond, a little below that. And next year, probably 3.5%, even with already incorporating some relaxation of the monetary policy by the turn of the year. They have room for 200 or 300 basis points throughout the year next year. So, inflation is slowing down quite substantially. In the last few months, you’re getting 0.2, 0.3. There’s a little bit of volatility because of airplane tickets and this kind of thing.
But when you look at the core inflation, it’s really converging in a nice way, including in services, which was a concern. Because unemployment in Brazil, I didn’t mention this in the first question, but unemployment in Brazil has been quite low. Job creation has been quite strong in the last three years. So, there was a concern that this would put too much pressure on services. But it has been… there’s work to be done, but it has been pretty much under control.
Emily Slater: Well, I think the Brazil story domestically has been pretty strong. And I guess I want to ask, how do you think that the strength of the Brazilian economy and the export-driven growth have positioned it to manage the global tariff environment that we’re in now? Obviously, every country is having to, and has had to, respond to what the US has done in terms of tariffs. So how do you think the Brazilian economy is positioned to navigate that, and have the policies responded to this changing environment?
Joaquim Levy: Look, you realize Brazil is in a very particular situation with respect to the US. Because in this case, the US has run a surplus for the last 10-15 years. The trade on goods, and if you include services, the surplus is even bigger. Because Brazil is like the third-largest market for a number of things like Netflix or Google and so on. A huge market, which means that we do pay a lot, and now with an increase in AI and so on, even more. We started from a situation where we actually had a deficit with the US, which in a sense, is good. Because even if for specific reasons, temporary reasons, this was not totally factored in, in the first round, in the liberation day, we were in the group of 10%. Then for very specific reasons, there was an additional 40%. If you go back to the original situation, which would reflect more the methodology, let’s call it, adopted in liberation day, we would be pretty fine.
What has been the consequence? First, it was pretty uneven. There were a lot of sectors that didn’t get the full force of that, particularly products that are of great interest to the US. Well, oil, for instance. We send a lot of oil to the US to be refined there and exported elsewhere. We had a surplus with oil, although we used to import a lot of diesel and other oil products. But anyway, so this is not covered. We have orange juice, which is also a very important fuel, for the morning, right? Coffee, for whatever reason was not included, but I think sooner or later it will also be included because there is no alternative for the US to get coffee.
But more generally, what has happened is that, of course, it hurts, but we have managed to redirect most of our exports to other places, but there’s a reason for that. A lot of the things that we export to the US are basically commodities. Not only do they enter in the productive process in the US, so for instance, we export steel, but a lot of the steel that we export are slabs that then go to a steel mill in the US, and then it becomes a final product. Which means that actually, having the Brazilian thing lowers the price of US products. If you put too many tariffs on the Brazilian thing, the final US steel product will be less competitive vis-a-vis with what is imported, right? But anyway, we believe that most of these things will be exempted or will have reduced tariffs.
But meanwhile, we’ve been able to find new markets for most things. There are specific things, for instance, some wood products that are used in construction here in the US, that is still a little bit of a problem, that has not been solved yet. So, we lost some money, but it’s not something that means 2-3% of GDP; it’s more like 0.2% of GDP, the impact of that. And the Brazilian government is finding ways to support the companies temporarily a little bit, like providing liquidity and so on.
But the most important thing is: A) to continue the negotiations, which are doing fine. I’m sure everybody saw what President Trump mentioned during the UN meetings, and there have been other conversations since that, and there will be others in the future. And now they have the teams, Secretary Rubio talking to our Foreign Affairs ministers, there’s progress. So, this is the first thing. The second thing, yeah, we’ll continue to expand the diversification of our trade. Everybody knows that China is a very large partner, but it’s a very large partner among a hundred other partners that we have in international trade in Brazil.
Emily Slater: I want to talk a little bit about this kind of multipolar global economy and how Brazil is navigating that. Because President Lula and others have coined the Brazilian foreign policy approach as being “active non-alignment,” right? So, kind of a throwback to the Cold War era, right, not aligning with any global superpower. So, tell me a little bit more about what Brazil’s foreign policy approach is and how it is navigating the US-China tensions at the moment.
Joaquim Levy: Okay, I’ll be very, in a way, local on my first reaction to that. There’s a saying in Brazil about one state in Brazil, which is an important state, which is “Minas Gerais is where it has always been.” In a way, Brazil is where it has always been. The world has changed, but we continue to believe in the same things. It’s exactly that. When there was the Cold War, we said, “Okay, guys, fine, we understand the different things, but we don’t have to take total sides. We may have more affinity with one thing than with others, but we’re not taking sides. It’s not really our fight.” and you have contributions for everybody. Then, there was no Cold War anymore, and nobody paid attention to this position.
Now maybe there is a little bit more of a polarity, and we continue to say the same thing: Look, guys, everybody has their own way of conducting things, they have their own interests, and that’s fine. But we can deal with everybody, especially when you relate to trade. We believe that, look, we have our own preferences. Democracy in the more traditional way is the way we structured our country. Separation of powers, with harmony, elections, freedom of speech, all of this. That’s the way we live, we believe, and so on. But it doesn’t mean that we cannot talk, we cannot trade with people who have a different approach to that. Even when countries change their own approach to that, we’ll continue to be friends, and we’ll continue to do things. So, I believe that’s really the point.
Now, why? This is the non-alignment. Now, the fact may be that there are many important things, common challenges, that Brazil likes to contribute to. Okay, so climate. We have the responsibility of the COP this year, we will be active on trying to push this agenda. Poverty: Brazil is a country with poverty, experiencing poverty, even experiencing hunger. So particularly this president, but the country is very sympathetic to any work that is related to that, which is global development, we got just the Nobel Prize about development, right? So, this is where we want to be active, on this kind of agenda, even on health in some cases. So that’s the way I’d see the active non-alignment.
We’ve always been non-aligned. We have sometimes, when it’s really necessary, or if we are in any way hurt, we may take sides. I mean, one example that is cited very often is during World War II. Brazil was neutral, not supporting either country. There was some expectation from the US; we could get a few things before the US entered the war. Then after the US entered the war, for whatever reason, the Axis decided to sink a few of our ships and take other actions, and then we took sides with the US, and we really helped, with our small contribution, but we helped the Allied effort for the liberation of Europe. We had a lot of Europeans that had moved to Brazil, particularly from Italy. So that’s really our tradition.
Emily Slater: Autonomous until under attack.
Joaquim Levy: But active, as I said, on the good causes, on things that are close to our heart and where we believe we can contribute.
Emily Slater: So, I want to pick up on a couple of things that you mentioned. You mentioned an active agenda. Obviously, you mentioned COP this year, and Brazil had the G20, was it last year, the G20 presidency? And has the BRICS presidency this year. Tell me a little bit about how Brazil has used those different policy platforms, those different global multilateral platforms, to advance some of its agenda. How does Brazil view the BRICS coalition? It’s been expanded now as of last year, and how is it using its presidency this year in terms of agenda setting for BRICS?
Joaquim Levy: Okay, let’s start with COP. For COP, we think that it’s a time of implementation. A lot has been negotiated, there are promises and so on, so let’s see what we can make happen. This has to do with the funds to support tropical forests, tropical forests are essential to the world. You have to find ways to protect not only in Brazil, but think about Central Africa, think about Indonesia, other areas that have tropical forests.
We are trying to have the “Tropical Forests Forever” fund, which is a clever idea. Actually, we developed this during my time at the World Bank, and it seems that there is interest from a number of countries. We’re also trying to develop nature-based solutions that help to address climate change, and in some cases, if you can think about biofuels as I mentioned before, they are affordable ways to reduce emissions.
It’s very important that even rich nations look at affordable ways to address climate, because if they are not affordable these days, it’s very difficult to make them happen, right? But if it’s something that can be cheaper, solid, and bring the results—and in addition to that, you help development, you help protect things that if they’re not protected, would be very difficult to get back again, like forests. These are the main agendas of Brazil for COP: implementation, implementation, implementation, with some discussions also about financing, which is actually part of the paper we wrote two years ago here at Bretton Woods.
The G20 is kind of a passage de bâton, with some focus on, again, hunger and development, and I think the sequence of India, Brazil, and South Africa has been very positive. I think this will give a lot of good things for the US to work with next year. But we know the important thing about the G20 is that it continues to run; it’s a great place for conversation and get some things done, in an informal way, to help them happen.
Emily Slater: Get political by in, right?
Joaquim Levy: Yeah. In the case of South Africa, I should mention, related to climate, the effort they’re making to bring more transparency and more homogeneity to carbon credits. They have a framework that has been discussed, and I think this would help to develop a global market for carbon credit. This is one specific thing that they’re doing that shows this continuation.
Now, BRICS. BRICS is a different game because BRICS is not really a treaty. We don’t make very strong decisions, but it’s really a place where countries can get together, can discuss, and mind you, sometimes you think that if you have a coalition, it has to be against something. No, it can be just in favor of some general thought. Now, there’s a lot of diversity in BRICS, right? So again, you have to look at the common ground, which is development, which is, in a way, climate, and see what you can do together. Now we have widened the constituency of BRICS, which I think brings also new angles, new visions to it. It’s mostly, I believe, a place where you can build some sort of consensus, sometimes on narrow topics, and move together on that.
We have a bank, which is a relatively small development bank. It has been working, it’s increasing. There are some challenges because some of the shareholders, of course, are in a special situation these days. But it is operating, and I think it responds to some of the demands of the group. I believe that it’s very non-controversial, BRICS. It’s one more voice. Even though for some things people might think, “Oh, but what does it mean when at BRICS, people talk about trade in a domestic currency without having to resort to a third currency,” and so on and so forth. Well, this may appear very controversial, but it’s exactly what the BIS is doing, right?
We had some discussions about that because technology now allows so many things, so many simplifications. A few weeks ago, Swift adopted some of these things with tokenization and so on and so forth. Which, you mentioned when I was at the World Bank, this was 2017, right? What we were discussing at that time, this was the beginning of these things. We said for cross-border transactions, that’s fantastic. We spent a lot of time discussing remittances, which now is a reality not only in countries that have complicated situations, but it lowered the cost of remittances quite a lot. This is the new reality: you can call it a stablecoin, you can call it whatever, but it’s obvious that we’re going to have more choice in the way you send money, you pay for goods, you pay for services, and there’s no hostility in that.
Emily Slater: If the outcome is to make it cheaper, more efficient, accessible…
Joaquim Levy: Accessible to everybody… and then of course, there are some hard realities, right? Some currencies are stronger than others, and we see now it’s 15 years since the time of Governor Meirelles in Brazil; we have a sort of agreement with Argentina that you allow banks to do netting. Of course, if you have an imbalance, it’s more difficult to do. In many cases, you have to compare the reality on the ground. But technology allows a lot of wonderful new things that make life easier and reduce costs for everybody.
Emily Slater: Something else that we were working on when you were at the World Bank, I remember, that’s now coming into fruition is we, I remember we had many conversations, Bretton Woods Committee and World Bank, about infrastructure as an asset class. And there’s actually been some movement now with the World Bank and the Private Sector Investment Lab towards securitization and towards more standards to mobilize financing at scale.
I don’t know if you’ve been following closely any of the private sector work with the World Bank and if you have any thoughts on finally seeing some movement, in my opinion, on some of the private sector mobilization. Which, you started a lot of these initiatives when you were there, but 10 years or longer to get some of these things into implementation. We’ve got to move faster, right?
Joaquim Levy: Again, there are realities on the ground that you have to address, right? Risk you can shift around and so on, but you cannot eliminate it. Someone has to hold back at the end, and of course, you can find clever ways to increase transparency, to reduce the perception of risk on many things. In some cases, through reforms, even reduce the risks. One thing that has continued to increase is the question of platforms. And I have to say two things regarding Brazil because it informs my views too. One, in Brazil, most of the infrastructure nowadays is private, and more and more, what you have is concessions of roads, everything—airports, roads, ports, gas, electricity, telecom. We still have public mail, but with a lot of private companies also providing parcels and so on and so forth. This is one thing. The other is that transparency is very important. For instance, we have, related to climate, we have done with Bloomberg and GFANZ and so on, a big platform with all the projects that are worthwhile to invest in, to look at, and so on. This is curated by BNDES and has been quite interesting. You don’t have miracles, but you have things moving. You talk about hydrogen, you talk about reforestation, a number of things, and some of them with components of infrastructure.
I believe that the more and more you have alignment of multilaterals is important. There’s so much they can do. There’s the issue which we also used to discuss, which is prudential regulation. Sometimes people don’t realize that, for instance, a green infrastructure has a better return or is steadier than standard infrastructure. In some cases, we could argue that the capital charges for infrastructure in some countries are very high. I’m glad to see the progress. I think that more and more, this is also tied with the climate thing. We know Professor Bhattacharya and Stern, and so on, they’re doing a great job discussing this. It’s interesting because most of what is discussed there is how you can make an investment that you need anyway but do it the right way. If you do it looking longer and thinking about sustainability, usually you have lower risk than if you just do something that may appear to be a little bit cheaper in the short run. This, I think, can help the progress in infrastructure.
Let me finish with one thing in this respect, which is an evolution of something that already existed at that time. It comes from 15 years ago with Mark Carney. This idea of what was called at the time “stranded assets,” then we had the Bloomberg report, which is basically to have companies making disclosures about their carbon footprint, their potential trajectory, and how they’re going to really make this trajectory happen, which is the capital allocation they’re going to do.
This has become some accounting standards, right? The ISSB, the IFRS S1 and S2. Unfortunately, most countries have not made that mandatory. Brazil is likely to implement this by ’27; it’s in the books, the regulation points to that. I think this is very important. This would help dramatically, all these questions of financing, including in the developing world. Why? Because when companies have to disclose what they’re going to go and how they’re going to do it, the question about affordability will be very important. This will help a lot of companies have a different look at, for instance, “Oh, I need energy. Where are we going to get the energy?” Well, it just happens that a lot of developing countries are good sources of energy, sustainable energy, and things like this.
If you could have the implementation of ISSB, these standards, and have real disclosures in accounting terms for companies, the big companies in the world—they’re not forced to do anything, right? They just have to show where they are, what they plan, and how they plan to get there, and the capital allocations that are involved. I think this could have a tremendous impact on the choices by investors, by companies, and I think because there are clear comparative advantages in many developing countries, you could have some capital moving there. And usually, the experience even 15 years ago is that, for instance, you’re going to do energy production in a country. Even if most of it is for export, a lot of it will stay there. It’s a way to anchor a project in a developing country that if you’re just looking at the domestic market, oh, it’s much more difficult. It’s much more difficult to mobilize. There’s only so many guarantees that the World Bank can do. So I’d say, and this is again something that we put in the report, introducing that at the level of surveillance by the IMF, but also in terms of discussions and the general push of the World Bank, would help a lot to achieve the goals that we all want to see really happening and getting to every country.
Emily Slater: Yeah, well, a lot has changed in two years since we wrote that report. How do you—I mean some of these recommendations and some of the goals on climate, for example, under the Brazilian COP presidency—how do you see those progressing in this global environment where it just seems like the climate agenda has taken a little bit of a backseat in the last couple of years?
Joaquim Levy: Look, I don’t have the full picture. I hear very often that companies know what’s going on. They may not brag about these things for any reason, but when they make their decisions, they factor it in. Because it’s reality, right? I mean, we see two things. First, you see the extreme weather events and so on happening. Second, technology continues to move. So, interestingly enough, AI will create a problem because it will increase the demand for energy, but at the same time, it will also create new ways of doing things. Some of which will reduce energy consumption, and others that I think will help us even to get new sources of energy.
For instance, people have realized that AI is of great help, for instance, to make… you know how fusion energy is produced. I mean, you have the plasma, which is a very hot thing that’s ionic, that’s where you get the hydrogen getting together and so on. That’s beautiful, but very hard to control. And with the usual, old-time algorithms and so on, it was pretty much impossible. You might get one millisecond, and then the whole thing would fall apart. Now we’re seeing a lot of progress using AI, and all sorts of neural networks and so on, to be able to respond much quicker to any changes in that. These are electromagnetic fields that you have to control. I mean, really hard, hard, hard, science. Just a few miles from here, less than 100 miles from here, there are people who are investing big money, private sector together with universities, and they have the hope—that it will be in 2026 or 2027, but if it is 2030, who cares? There are new things happening, and companies are aware of that, and they are incorporating these things. Of course, you cannot take the risk of, “Oh, in five years, we’re going to have all the energy we need, so now let’s burn everything we have.” It’s not like this, but it means that the issue has not disappeared. The way to address it may have changed somewhat, but people are very conscious of its importance. Even in the US, the displacement of coal by natural gas has reduced emissions in the US quite dramatically. As long as you don’t have fugitive emissions from natural gas, we’re making real progress on that.
Emily Slater: Well, I want to ask a few more questions and then we’ll wrap up. One is, we’re talking a lot about the World Bank and some of the global multilateral convenings. We’re here at the IMF-World Bank Meetings week. I want to ask you, what are you watching for this week? What are you expecting to happen at the IMF-World Bank Annual Meetings this week?
Joaquim Levy: Of course, from the IMF, some sort of discussion and pulse-taking of the macro. I’m not going to say something absolutely revolutionary or new, but we have not really seen the consequences of all these changes in policies, right? It may happen, it may not happen, maybe they don’t happen because it would not happen anyway, or they may not happen because there’s AI that is changing everything. Or maybe they happen and there’ll be a cost, and we may have a slow patch next year. I think that from the IMF, in terms of the global economy, this is very important. I think the IMF will be happy that although there’s some rearranging in terms of tariffs and so on, most countries decided not to increase tariffs, including Brazil. There’s some discussion about reciprocal tariffs, but it’s not worth doing. This, of course, drastically reduces the risk of a global slowdown, right? I think this will be the main thing. If there are still old-timers in the IMF, I hope to see something about fiscal, there’s advanced risk, and you see in bond markets, you look at the CDS of different countries, and they go up and down and so on.
From the World Bank, I hear that they have a new realignment with the IFC, and there’s new roles for MIGA. I think this will occupy a lot of the time and what to expect from this. I think there will be a lot of interest in both cases, and it will be a really good opportunity for people to set their minds for the next year.
Emily Slater: Yeah, I think we’re all going to be waiting to hear about both of those. What the IMF thinks about the global economy outlook. Some of the impacts haven’t quite shown up yet, are they going to? Are we going to innovate our way out of a potential slowdown? And then as you said, on the bank side, I think absolutely, what does this restructuring really look like, and what does that mean?
Joaquim Levy: What will be the goals now and so on, yeah.
Emily Slater: And can it really help mobilize finance at scale?
Joaquim Levy: Absolutely, I think, yes. They get together. There are a few tricky things, and it will be interesting to see how they address it because, as you know, IBRD lends to governments, IFC to companies. How do you…
Emily Slater: How do you have those balance sheets together?
Joaquim Levy: Yes, how do you mix that so that you get huge projects, but they’ll be private projects or be public projects. Let’s see how this moves.
Emily Slater: And maintain the coveted AAA credit rating, right?
Joaquim Levy: Absolutely, absolutely.
Emily Slater: Yeah, which I think will be a big question. Okay, last thing I want to ask you, I can’t let you go without asking you about Brazilian elections next year. What is the current political landscape in Brazil? What are you expecting for elections? What’s the political discourse like?
Joaquim Levy: I mean, first, it’ll be one more election. Every election you have the possibility of alternance or not, it will depend on a number of factors. We don’t know who the candidates will be. There’s a presumption that the president will run again, but he himself has not been totally sure about that. Then, there are a number of interesting possible candidates from the opposition, but still, no clue of who it could be. Also, what will be the main platforms? I think that everybody wants to see Brazil focusing on a few things. If you want more investment, you probably need a little bit more savings. You don’t have to have 30% of GDP in savings, but if you had some ways to grow gross savings to, say, 20-23%, I think this would help a lot. What do you need for that?
Of course, social problems in Brazil are very important. There are things that you can do a little bit differently, or not. You can moderate a few things. There’s also a discussion which is a little bit more technical but has political consequences, and I think it would be interesting to see both sides: Brazil has a tremendous advantage in all sorts of sustainable energy, and this could help us to attract investments and so on and so forth. But this requires some changes, from promoting hybrid cars to… in the electric sector, there are a few things that you have to change to ensure the reliability of the network and so on, without a huge cost or huge emissions. There is this combination of big vision with some guidance to the business sector, not only on fiscal policy. I hope that the discussion is not just fiscal, fiscal, fiscal, because it’s not enough, and from there, I think we’re going to have a good discussion.
I think the time of pure polarization is gone. People are tired of that. Of course, sometimes it’s easier to just say something, the other says something… but this is not very productive, and people want to see things that will bring results, benefits, and in a transparent way, not just promises and promises. I think elections for the last 2,500 years have been a source of good things, sometimes also a sort of short-run focus. But I think on the whole, it could be a very fruitful period for Brazil. I don’t see any reason to have uncertainty or problems with the economy during the period. Some people might prefer one side than the other, markets may move, it’s totally normal. We saw here in the US between September and November last year, how much the dollar, interest rates, everything moved before and after the election and then settled down
Emily Slater: After liberation day?
Joaquim Levy: [laughs] exactly, some market movement, it’s okay, but I don’t think that it will be at any level that will create instability or anything like this.
Emily Slater: Yeah, well, I want to end on your note of optimism that the period of extreme polarization is over in Brazil. I hope that’s the case, and I hope that’s the case here in the US going forward in our election cycle as well. Thank you very much, Joaquim, for coming today. We covered a lot of ground. No one better to discuss all things Brazil. You gave us really great insight into both the economy, and the politics, and also where it fits in on the global stage. Thank you so much.
Joaquim Levy: Thank you. My pleasure.