Bolsonaro pension reform will strengthen the real, investors say

A successful impetus for reform the pension system will help the Brazilian real to overcome global problems and even disappointing organic growth this year, according to the best Bloomberg badyst.

Investors have largely focused their attention on the president's debate on pension reform, Jair Bolsonarohe said Diego Ruiz, Stocks and Securities badyst in Bogota who predicted the most accurate figures of the Bloomberg ranking for the last quarter.

"What makes us more and more optimistic is the ability of Bolsonaro to carry out pension reform," said Ruiz. "We must remember that the main engine has started to focus more on local factors than on international factors."

Ruiz kept his vision of the real business throughout a reform process laden with delays or even fights. He has maintained his forecast for the currency unchanged since January, but says it will "soon" update the numbers, the real has traded even above 3.6471 for a dollar this year and has also reached a level as low as 4., 0987.

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Ruiz observes a strengthening of the real close to 4%, compared to current levels, at 3.65 by the end of the quarter, and expects a rebound above 3.6 d here the end of the year.

Vote in committee

The real was up 1.8% in the last quarter, outpacing the broader MSCI EM index, following the Federal Reserve's recent fuzzy policy and optimism over the the pension reform that has driven up the markets.

The currency rose 0.7% on Thursday after the government pbaded the bill through a special committee, which would pave the way for a full vote of reform in the lower house before the Congress break in mid-April. 39; year.

Additional gains next year will depend on the resolution of trade tensions and the state of the global economy, Ruiz said. The United States and China are Brazil's two largest trading partners. For the real world to continue to climb, the two countries will have to reach an agreement, Ruiz said.

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Brazil's own economy is another obstacle to any lasting gain in the currency.

"The Brazilian economy is one of the biggest vulnerabilities," Ruiz said. "We find that the growth rate is slightly lower than the expectations of the central bank."

Policymakers cut their forecasts for GDP growth in 2019 last week and said the economy would grow only 0.8% this year, less than the 2% estimated in March.

Although Ruiz says the Fed's moderate recovery is opening the way for Brazil to negotiate a rate cut that could boost the economy, significant challenges remain for the largest economy in the world. Latin America. Traders will set their prices based on a reduction in Brazil's benchmark rate this month.

It's not that none of this matters at the moment, as far as reality is concerned.

"The debate on reform will be the main driver in the short term," said Ruiz.