[OPE-L:5706] Real again

Tue, 11 Nov 1997 16:07:58 -0500 (EST)

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In response to Paul C's stimulating comments on the policy alternatives for
the left in Brazil:

1- Paul's suggestion that the exchange rate (XR) should be that necessary to
balance the current account seems to me unduly rigorous. A freely floating XR
would bring the BP as a whole into balance, and that is more than the left
should concede (I think) because there is no reason why the BP should always
be zero. Much less the current or capital accounts individually. However,
both should be sustainable, which (in Brazil) they are not at present.

2- I think that a hefty tax on large landholdings is socially important. At
present, there is a tax on land, but receipts are pretty minimal. A
substantial tax, with severe penalties for evasion, may help break up
unproductive farms and facilitate land reform. There are millions of landless
peasants in Brazil. Just look at this idea: let the landlords assess the
value of their land for tax purposes. However, every year a certain number of
farms would be selected by lottery and compulsorily purchased by the state at
the declared value, plus 200r something like that, because of the owner's
trouble. Then they would be auctioned, with special rights of repurchase for
the previous owner. If this system could be enforced (this is a big if), tax
payments would certainly increase (I seem to remember that Maurice Allais has
proposed something along these lines years ago).

3- Trade liberalization can affect workers' interests negatively. The closure
of 'uncompetitive' firms leads to unemployment, with no guarantee of
alternative placement (except in a neoclassical world). There are many other
channels through which workers can lose, e.g, through the reduction on the
tax revenues on the imports of luxury goods.

4- I am generally against privatisation, but not against it in principle. If
the state takes up a car company (as in the UK), or a food processing company
(as in Brazil) to save it from bankruptcy, I'm not convinced they should
never be returned to private capital. It's completely different with
telecoms. However, they've got to be properly managed and accountable to
society, which they often aren't.

I hope we can continue with this discussion, and would like to know what our
friends in Brazil think about it.