Brazil’s Real May Rise Near 3 if Pro-Reform Govt Emerges: Ex-BCB
(Bloomberg) -- Odds of President Rousseff’s impeachment increased dramatically following recent developments, Luiz Fernando Figueiredo, CEO of Maua Capital says in an interview at the firm’s office.
- “Why is the market improving amid such big political tension? Because the institutional solution is clear, and it is the impeachment”
- “It is becoming clear that Brazil won’t default”
- “It is time to buy Brazil,” Figueiredo, BCB deputy governor from 1999 to 2003, says, although it should be carried out cautiously, with no leveraging yet
- Should new government embrace reforms, BRL may advance to near 3.00/USD or even stronger; inflation could slow to BCB target of 4.5%, prompting interest rates to drop to 10% vs current 14.25%
- Prospects of new government with political support to approve reforms favor Brazil assets
- There are signs VP Temer, successor in case of Rousseff impeachment, is dealing with opposition
- Also sees signs of consensus being built on need for budget reform, spending cuts such as those linked to pensions, and avoiding tax increases
- If Brazil overcomes the political crisis, economy may benefit from adjustments already made in current accounts and govt-controlled prices; fiscal adjustment is still pending
- NOTE: BRL pared gains after rising 3.7% with impeachment prospects when BCB said it sees room for partially unwinding FX swaps
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Luiz Figueiredo (Maua Capital SA)
Dilma Rousseff (Federative Republic of Brazil)
Michel Temer (Federative Republic of Brazil)
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