HALISTER1: Brazil Temer Reforms Key for Market and 2018 Election: Analysts

Brazil Temer Reforms Key for Market and 2018 Election: Analysts

(Bloomberg) -- Michel Temer’s ascension to the presidency today may lead to the acting president playing a decisive role in 2018 elections if fiscal reforms are implemented, and help spur a further rally in Brazilian markets, analysts say.
  • Temer government may show similarities with that of former president Itamar Franco, successor of Fernando Collor, who was impeached in 1992, Ricardo Sennes, political scientist at Prospectiva Consultoria, says in a phone interview
  • Franco named Fernando Henrique Cardoso to the post of Finance Minister, who then succeeded in fighting hyperinflation and became a successful president candidate two years later
    • Should Brazil succeed on reforms, such as the public spending cap and pension regime, boosting economy before 2018 elections, Finance Minister Henrique Meirelles could be a competitive presidential candidate, supported by the Temer political group
    • That could show investors a “horizon” of ongoing reforms beyond 2018, Sennes says
  • Temer reforms are key for the market to embrace a new rally as the impeachment itself has already been priced in, Eduardo Velho, chief economist at INVX Global Partners, says in a phone interview
  • Post-impeachment, market may shift focus to the willingness and capacity of the Temer administration to accelerate and deepen the fiscal adjustment, Goldman Sachs’ Alberto Ramos writes in a report
    • “Hesitations and/or failure to deliver tangible steps towards fiscal consolidation may trigger adverse market dynamics”
  • NOTE: Collor, Brazil’s first president to suffer an impeachment process after a corruption scandal, voted this Wednesday in favor of Rousseff’s impeachment
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Michel Temer (Federative Republic of Brazil)
Alberto Ramos (Goldman Sachs Group Inc/The)
Eduardo Velho (Invx Global Partners)
Fernando Cardoso (Brown University)
Fernando De Mello (Federative Republic of Brazil)

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