The Economist: MG has finances in ruins and needs drastic spending cuts

A publication by the British magazine The Economist classifies the fiscal situation of Minas Gerais as in a critical state.

According to the report, the budget's commitment to pension payments without collateral and interest limits the ability to execute investments in discretionary areas.

The publication, one of the most influential in the world, states that "state finances are in ruins", which should force the next governor to "drastically cut spending".

The report highlights that, although the government of Romeu Zema (Novo-MG) has not contracted new debts with the Union and has recorded primary surpluses since 2021, the amount of accumulated debt will require the next managers to carry out expense reductions.

The chief economist of Fiemg (Federation of Industries of the State of Minas Gerais), interviewed by the magazine, stated that the financial room for maneuver for future administrations is non-existent.

The report presents Minas Gerais as the "mirror state" of Brazil, arguing that the geography, ethnic composition and political scenario of Minas Gerais serve as a preview of the country's future.

The text highlights that, since 1989, no president has been elected without winning in Minas Gerais, consolidating the state as the main national political battlefield.

The Economist also points out the impact of budget restrictions on local infrastructure. The state concentrates 13% of the country's traffic accidents on its highways.

In the productive sector, Minas Gerais accounts for 40% of Brazilian mineral production, including iron, niobium and lithium, but the economy remains dependent on the export of raw materials, with low investment in research and development for the manufacture of products with higher added value.

On a national level, the magazine cites IMF projections that Brazil's gross public debt could reach 107% of GDP by 2031. This index is driven by real interest rates close to 10%, which, according to the analysis, discourages productive investment in machines and innovation.

The report also addresses the impact of lithium mining in the Jequitinhonha Valley. If on the one hand the activity generated new jobs and commerce, on the other it resulted in an increase in housing costs and complaints from the local population about dust from the mines and the preservation of water resources.

Experts consulted by the magazine argue that tackling structural problems, such as improving education and reducing risks to private financing, is necessary to change the current economic model.

Source: CNN