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Caramba! Brazil's Pension Reform Vote Delay Suffers Another Delay, Frustrating President Bolsonaro

Apr 18, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • President Jair Bolsonaro was elected on promises to reform government programs and improve government finances
  • His signature reform is an update of Brazilian pension law, including increasing the minimum retirement age, in an effort to lower the government's fiscal deficit
  • Investors bid up Brazilian assets in anticipation of significant fiscal improvements and a better economic environment, with confidence in the new Economy Minister Paulo Guedes
  • Inexperience has plagued President Bolsonaro's and his team's efforts all along the way
  • Stumbles have include cabinet members verbally spatting with lawmakers while testifying in Congress and a separate fight with the head of the Lower House of Congress
  • Investors expected R$700 million in fiscal savings when the proposal was annouced
  • Concessions that have been granted during negotiations have lowered that number, with the most recent consensus estimates closer to R$500-R$700 million in 10 years

Brazilina Bovespa Performance in USD$, 1 Year 

bovespa 1 year

 

  • A vote was to be held in a committee Wednesday to move the proposal forward but further demands at the last minute from a group of lawmakers delayed the vote until next Tuesday
  • Economy Minister Paulo Guedes said today that the actual savings from the bill will be "significantly"n higher than the market is expecting; he said it could be more than R$1.1 trillion in 10 years
  • The proposal requires a constitutional amendment and a number of votes, including 308 of 513 Deputies in the Lower House of Congress and 49 of 81 Senators in the Senate
  • While the government sees passage in the second quarter, the market expects it closer to September
 
 
 
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Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS