South American Real Estate News

/ All categories of countries are / Brazil approves pensions’ reform: markets soar and stocks hit an all-time​ high

Brazil approves pensions’ reform: markets soar and stocks hit an all-time​ high

Post available in: English

Brazil’s Senate on Tuesday gave final approval to a landmark reform of the country’s social security system, in a step seen as key to stabilizing public finances and the economy. The text was approved by a vote of 60-19.

Earlier in the day the Senate Constitutional and Legal Affairs Committee approved the text of a pension reform bill, while Brazilian markets rallied and stocks hit an all-time high as the government’s key policy this year to revive flagging economic growth was achieved.

Pension reform has dogged successive governments over the past 20-30 years, during which time the social security deficit has steadily risen. The bill aims to save the Treasury around 800 billion reais (US$195 billion) over the next decade via a range of measures, including raising the minimum retirement age and increasing workers’ pension contributions.

The most meaningful change sets a minimum retirement age of 65 for men and 62 for women. That’s up from averages of 56 and 53, according to the Organization for Economic Co-operation and Development. The overhaul takes aim at a swelling deficit in Brazil’s pension system, which a research firm says accounts for some 40% of total federal spending.

The government and economists say it is the single most crucial measure to put Brazil’s public finances on a more stable footing, boost investor and business confidence, and inject life into the sluggish economy.

“The (stock) market rallied a lot today, in part because of this passage,” said Tony Volpon, chief economist for Brazil at UBS. “It looks like local investors who have been buying the market in the face of foreign selling are beginning to win the argument.”

Brazil’s benchmark Bovespa stock index rose 1.1% to close at 107,197 points, breaking above 107,000 points for the first ever. The Real rose more than 1%, touching 4.06 per dollar.

Overhauling Brazil’s costly social security system was President Jair Bolsonaro and Economy Minister Paulo Guedes’s No. 1 economic reform push during their first year in office.

Its passage through the lower house of Congress in July, and imminent Senate approval, helped give the central bank the cover it needed to cut interest rates. Failure to pass pension reform would lead to higher risk premiums in local markets, the central bank repeatedly warned this year.

The country’s public finances are extremely stretched partly because social security outlays are so high, but also because tax revenues have fallen far short of expectations due to weak growth.

The economy is on track to grow by less than 1.0% this year, lower than the previous two years and well below the 2% or more most economists, as well as the government, expected at the start of the year.

The government’s original pension reform bill envisaged savings of 1.237 trillion reais over the next decade. That was diluted to just over 900 billion reais in the lower house, then down to around 800 billion reais in the Senate.

Source: Mercopress

(Visited 55 times, 1 visits today)
Gateway to South America

About Gateway to South America

Gateway to South America was established in 2006 as a single office in Buenos Aires. The company has since expanded into a vibrant regional network, servicing the Southern Cone clients in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay with professional real estate marketing services. If you enjoy reading our news site please share it on your social media below.

Post available in: English

Make a comment on this post

Your email address will not be published. Required fields are marked *

Visit us on LinkedInVisit us on FacebookVisit us on TwitterVimeoVisit us on Pinterest