Brazil Difficulty With Pension Reform Leaves Traders Cautious
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
People
Carlos Kawall Leal Ferreira (Banco Safra SA)
Michel Temer (Federative Republic of Brazil)
Newton Rosa (Sul America Cia Nacional de Seguros)
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UUID: 7947283
(Bloomberg) -- (Translated by Google and reviewed by Bloomberg editors.)
- Market players are strating to show a more cautious tone regarding the government’s difficulties in approving the pension reform. It is not in the minds of players that reform won’t be approved, but the exclusion of state and municipal servants from any new rules, which followed earlier withdrawal of the military, sparked fears that resistance to change is greater than previously thought
- There is a “change of mood” about the chances of pension reform being approved without major changes, says Carlos Kawall, economist at Banco Safra, in a telephone interview
- “Market is not pricing a non-approval. The fear is of approval of a reform insufficient to contain the growth of public debt”
- Idea that the approval of the reform would be negative in electoral terms does not hold, says Kawall
- For the economist, the logic is opposite; failure to approve or approve a much weakened reform would harm the govt because the lack of reforms hampers the fall in interest rates and the performance of the economy, making room for a populist candidacy in 2018
- Approval of outsourcing bill was seen as a victory of the government, but narrow margin, with only 43 votes, didn’t bring confidence about govt support for other proposals, according to a report from newspaper Folha
- Newspaper Valor published an article on other divergent points in the pension reform
- Minimum age limit of 65 years for women and rural workers to retire, untying of benefits of the elderly and disabled to the minimum wage and transition rule at 50 years are among them
- There is uncertainty about the extent to which the reform will be “dehydrated,” says Newton Rosa, economist at SulAmerica
- For now, what avoids greater nervousness of the market is the fact that the economic team doesn’t give up on fulfilling the fiscal target, says the economist
- President Michel Temer govt risks suffering more setbacks in the pension reform debate, Rafael Cortez, analyst at Tendencias Consultoria says in a phone interview
- “Neither Fernando Henrique Cardoso nor Lula, presidents that were much more popular than Temer, succeeded in approving deep reforms. The risks are huge and the markets are over-optimistc”
- NOTE: Outsourcing passes; Reform may be modest
Alert: HALISTER1
Source: BFW (Bloomberg First Word)
People
Carlos Kawall Leal Ferreira (Banco Safra SA)
Michel Temer (Federative Republic of Brazil)
Newton Rosa (Sul America Cia Nacional de Seguros)
To de-activate this alert, click here
To modify this alert, click here
UUID: 7947283