Brazil’s Fiscal Plan Could Falter Without Pension Reform

Anna Edgerton – Bloomberg, 08/16/2016

Acting President Michel Temer’s prized fiscal austerity proposal tocap public spending will only succeed if he can convince Brazil’s Congress to pass a controversial pension reform as well, according to a leading member of his economic team.

While Temer’s administration is confident it can win congressional approval this year of a constitutional amendment to limit federal spending, the inability to cut back on retirement benefits would put public finances at risk, said Mansueto Almeida, the Finance Ministry’s secretary of economic monitoring. A spending cap with growing pension obligations would squeeze other areas in the budget such as health care, he said.

“With the constitutional amendment, spending will be limited, and without pension reform, those costs are going to just grow and grow and grow,” said Almeida, who studied public policy at the Massachusetts Institute of Technology and ran a popular blog on public finance before joining the ministry.

Read More…

 

Brazil’s Dilma Rousseff on Her Impeachment Trial, the Olympics and Zika

Matt Sandy – Times, 07/27/2016

As Rio de Janeiro prepares to host the Olympic Games, beginning on Aug.5, one person won’t be at the opening ceremony—President Dilma Rousseff. Rousseff has been suspended from her office amid charges that she manipulated government accounts, and her impeachment trial is scheduled to take place during the Olympics. She spoke with TIME’s Matt Sandy from the Brazilian capital of Brasilia, where she defended herself against accusations of corruption and promised that Rio would be able to pull off the Games despite a league of doubters.

Read the interview…

 

Mexico’s star wanes as reforms underwhelm, Brazil rises

Michale O’Boyle and Bruno Federowski – Reuters, 07/13/2016

Foreign investors in Latin America are warming to Brazil as a promising turnaround bet while souring on Mexico and its landmark energy reform that has yet to deliver.

Brazil has yet to recover from its worst recession in decades, inflation and interest rates remain among the highest in the region and it is saddled with a bloated public sector. In contrast, Mexico’s economy is growing at around 2 percent, has lower fiscal deficits and sounder public finances.

But while Brazil interim president Michel Temer’s reform agenda offers some promise, Mexico, once a darling of foreign investors, is now a source of disappointment. A slump in oil prices dashed hopes that President Enrique Pena Nieto’s energy sector opening in 2013 along with telecoms and banking reforms would boost foreign investment and supercharge growth while clouds are now gathering over its budget and economy.

Read More…

 

Latest Brazil Study On Impeachment Unlikely To Save Dilma

Kenneth Rapoza – Forbes, 06/27/2016

A technical report into whether or not Dilma cooked the books on fiscal accounts in 2014 turned out in her favor. Come to find out, she did not push forward accounts, but still — according to one Brazil economist I spoke with — did commit crimes of fiscal responsibility. That will still be for the Senate to decide when suspended president Dilma Rousseff goes to trial at some point in late July, early August.

What appears clear for Brazil watchers is that the back and forth of corruption allegations and now this latest study suggests that if the country was a chicken, it would be running around with its head cut off. It’s not very appealing except for the hungriest of vultures looking for a cheap meal.

Hedge funds that like regime change politics are watching the political play-by-play closely. The latest study might have moved the needle against impeachment, though 60 senators are still expected to vote for her ouster.

Read More…

 

Brazil’s Acting President OKs Transfer of $849 Million to Rio de Janeiro State

Paul Kiernan and Paulo Trevisani – The Wall Street Journal, 06/22/2016

RIO DE JANEIRO—Acting Brazilian President Michel Temer authorized on Tuesday the transfer of 2.9 billion reais ($849.0 million) from the federal government to Rio de Janeiro state, which is struggling with a fiscal crisis less than two months before the Olympic Games.

Rio declared a “public calamity” last week as a result of its deteriorating finances, which have forced deep cuts to crucial services such as education, health care and policing in recent months.

According to a presidential decree published late Tuesday, the transfer is to be used for public security during the Olympics and Paralympics, set to be held in August and September, respectively. But according to a communications official in Brazil’s presidential palace, it should free up funds within Rio’s state budget to pay for other obligations.

Read More…

 

Brazil Update: One Month into a Michel Temer Government

Luisa Leme – AS/COA, 06/17/2016

It’s just over a month since Brazil’s Senate suspended Dilma Rousseff for 180 days to hold an impeachment trial. Since then, the government of interim President Michel Temer has chosen a path that focuses on cutting spending on social policies to improve the country’s fiscal situation in the hopes of recovering investors’ trust. Temer took office May 12 and introduced an economic team led by Finance Minister Henrique Meirelles, who promised to “save the country” from its crisis while preserving Brazilian institutions and anticorruption efforts.

But many of the interim government’s decisions have been met with a backlash from voters, the judiciary, and even its own team. Temer not only picked an all-male cabinet, but 15 of the 26 ministers he selected face criminal investigations, with nine of them linked to the Lava Jato corruption scandal.

On top of that, two ministers had to leave their posts afterleaked recordings revealed they planned to use the impeachment process to halt corruption investigations, while the tourism minister resigned today due to links to Lava Jato. Temer himself was also linked to Lava Jato after the former president of the state-run oil transportation company Transpetro accused him of asking for kickbacksfor a mayoral candidate of Temer’s Brazilian Democratic Movement Party (PMDB). The São Paulo electoral court declared Temer ineligible for future office, based on the country’s clean record law, as he was convicted of exceeding donation limits for political campaigns.

Read More…

 

Brazil’s real: how low can it go?

Joe Leahy, John Paul Rathbone – Financial Times, 02/08/2016

When Dilma Rousseff attended the 2016 opening session of Brazil’s congress this week, she appealed to lawmakers to approve tax increases to tackle a widening gap in the country’s public finances.

Most critically, the president called for the reintroduction of a tax on financial transactions, known as the CPMF, that was abandoned in 2007 after objections from business. Opposition congressmen booed her.

But with Brazil reporting a budget deficit last year that was the biggest among emerging economies except for Saudi Arabia at over 10 per cent, unpopular measures are needed to save the country from a deepening fiscal hole, analysts say

Brazil’s Congress reconvenes, mired in pessimism

Silvio Cascione -Reuters, 02/02/16

Brazilian lawmakers return from their annual recess today with an overwhelming list of work to do as the country sinks into a broadening political, economic and health crisis.

And yet expectations about their actual capacity to make 2016 a better year than 2015 could hardly be smaller.

While there is little consensus on the measures needed to fix Brazil’s budget, deputies and senators are set to spend much of their political energy this year arguing about if and how President Dilma Rousseff should be impeached – and a whole new program of economic reforms could be started from scratch.

Read more…

 

UPDATE 1-Brazil 2015 budget gap hits record as austerity fails

Alonso Soto – Reuters, 01/29/2016

Jan 29 Brazil’s overall budget deficit soared to a record 613 billion reais ($150.99 billion) in 2015, central bank data showed on Friday, nearly doubling from last year as efforts to rebalance fiscal accounts failed and interest rates shot up.

The budget deficit equaled 10.34 percent of the gross domestic product, nearly five times its shortfall in the 12 months to mid-2011. The deficit mushroomed under President Dilma Rousseff, who took office at the start of 2011.

In comparison, at the height of its debt crisis in 2009 Greece had a deficit of 15.2 percent of GDP.

Read more…

Brazil’s Dilma Rousseff stares down budget black hole

Joe Leahy – Financial Times, 11/6/2015

Every week that passes in recession-hit Brazil seems to bring a new, bigger estimate for the size of the hole in the government’s finances.

The latest came on Wednesday from Hugo Leal, a lawmaker from congress’s fiscal commission who is overseeing a bill covering the government’s 2015 budget. He said he would amend the bill to allow for a 2015 primary fiscal deficit — the budget balance before interest rates — of R$119.9bn (US$32bn), more than double that of the government’s most recent official estimate.

The blowout, which mainly accounted for government off-budget liabilities with state banks, highlights the central problem facing Latin America’s biggest economy. Politicians are struggling to agree on and implement an austerity programme to plug the widening gap in government finances, creating uncertainty over the sustainability of public debt and undermining investor confidence.

Read more…