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.

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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.

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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.

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Brazil’s New Central Bank Chief Takes Post With a Pledge to Pursue Lower Inflation

Paulo Trevisani – The Wall Street Journal, 06/13/2016

BRASÍLIA—Brazil’s central bank Monday inaugurated a new leader to deal with an old challenge: taming stubborn inflation amid a shaky economy and political chaos.

Private-sector economist Ilan Goldfajn took over the post from Alexandre Tombini in an hour-long ceremony at the bank’s imposing building here. An appointee of Brazil’s suspended President Dilma Rousseff, Mr. Tombini had held the job since January 2011. On his watch, Brazil never met its 4.5% annual inflation target, as the figure stayed significantly above that level even as the economy ground to a halt in the past few years.

Mr. Goldfajn, 50 years old, was appointed by acting President Michel Temer, who will serve out Ms. Rousseff’s term if she is ousted. Mr. Goldfajn—a U.S.-educated economist who for the past decade led the economic-research department at Itaú Unibanco, Brazil’s largest private-sector bank—has pledged to meet the nation’s inflation target, without giving a time frame, even as prices are rising at a 9.3% pace, as of May.

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Michel Temer Aims to Restore Confidence in Brazil’s Economy

Simon Romero – The New York Times, 05/24/2016

RIO DE JANEIRO — Brazil’s interim president, Michel Temer, announced an array of proposals on Tuesday aimed at restoring confidence in the sickly economy of Latin America’s largest country.

Seeking to draw a contrast with Dilma Rousseff, the suspended leftist president whom Mr. Temer maneuvered to oust this month, he said he would try to repeal nationalist oil legislation, curb public spending and shut down a sovereign wealth fund.

Still, Mr. Temer’s televised briefing was light on detail as to how he planned to win approval in a fractious Congress for an array of measures like overhauling a crisis-ridden pension system that allows Brazilians to retire at an average age of 54.

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