Once again, Brazilian investors are betting on reform

Brazilian badets fell during the last week while the president's administration, Jair Bolsonaro, faced national protests, difficulties in approving key decrees and new tensions in its relations with Congress. However, the prospects for pension reform are finally improving.

The political consultations in Eurasia raised the chances of approval of the government's emblematic economic proposal to 80%, against 70%, because of the decreasing resistance of the legislators to a measure considered essential for the finances of Brazil. Bank of America Merrill Lynch has improved the country's sovereign bond rating to "overweight" it and announced that he was more confident that the government could propose a reform that investors will deem positive.

"Congressional support seems to be increasing as the government is increasingly willing to participate in political negotiations," wrote Jane Brauer and Lucas Martin, badysts at BofA, in a note last week. They added whatBrazil's weak growth in the near term could spur lawmakers to prioritize pension reform.

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This is an argument similar to that of Eurasia, which bet that lawmakers are now more engaged in pension revision. The Minister of the Economy, Paulo Guedes, issued alarming warnings from Brazil's point of view if the reform is not approved and even promised to shout to lawmakers on the issue. In recent days, local media reported on the legislator's plan to present an alternative text on pension reform, as the government struggled to defend its own proposal.

Shamaila Khan, director of the debt Emerging Markets of AllianceBernstein, sees more opportunities for the government to approve a pension reform that would save at least 600,000 million reais (146,000 million US dollars) in ten years. "the importance of reform," he said.

The pension bill was authorized by the Constitution and Justice Committee of the Lower House in April, much later than expected. The text is now before the so-called special committee, where it will be treated up to 40 times and will probably be amended.

Jair Bolsonaro: "If a man comes in, you have to put a ball"

The Brazilian real fell by more than 3.5% last week, which led to the fall of emerging market currencies, with protests exacerbating political tensions and lower growth expectations, which led to a sell-off in emerging markets. Assets at risk. The $ 8 billion iShares MSCI Brazil ETS fund – the largest publicly traded fund tracing Brazilian equities – wiped out the year's results.

"We think the government will approve the reform"The SPX hedge fund company said in its monthly letter to customers last week. "Not on its own merits, but because a good part of Congress members know that without reform, the country will head towards a permanent fiscal crisis."

F.D.S./