Pension Reform Increases Confidence in Brazil

President Jair Bolsonaro sent a proposal for a New Pension System to the National Congress. The plan aims to combat inequalities and privileges in the public and private pension systems. The government expects to save about R$ 1.1 trillion over ten years with the new rules.Positive ExpectationsGood expectations regarding the pension reform have increased the confidence of entrepreneurs, investors, and consumers in relation to the country’s direction.Calculated by the Getulio Vargas Foundation (FGV), the Entrepreneur Confidence Index reached 98 points in January, the highest increase in five years, while similar indices for industry, commerce, services, and consumers also recorded new increases. The Consumer Confidence Index, for example, rose for the fourth consecutive month in January to 96.6 points – the highest for the indicator since 2014.Reform Agenda“The pension reform is the watershed moment for the country. It will determine whether Brazil will grow more, whether interest rates will remain low, and whether corporate profits will increase,” points out Eduardo Velho, chief economist at Go Associados.The same scenario was also described by Haitong Bank economist Flávio Serrano, who sees the pension reform as a key factor for stability and assurance of economic growth in the future. “The approval of the pension reform would generate an additional boost and would certainly increase economic growth,” he says.Positive IndicatorsDriven by expectations regarding economic reforms, Brazil continues to show good results in economic indicators. In 2018, domestic industrial production grew by 1.1%, marking two consecutive annual increases, while the commerce sector closed last year with sales 2.3% higher, the largest increase in five years.At the same time, inflation remains under control and the benchmark Selic rate is at a historic low of 6.5% per year. Reacting to the good moment in the economy, the financial market is even more optimistic.Legislative ProcessIn Congress, the New Pension System project will be processed as a Proposed Amendment to the Constitution (PEC). Before being presented for a vote in the Chamber’s plenary, it will be analyzed by the Constitution and Justice Commission (CCJ) and a Special Commission. If approved, it will then go to a vote in the Senate, where it will also be analyzed by that House’s CCJ before going to the plenary.Source: BrazilGovNews