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  #251  
Old 01-12-2018, 05:45 PM
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Mary Pat Campbell
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BRAZIL

https://www.bloomberg.com/news/artic...r-reform-delay

Quote:
Brazil Pays Credit-Rating Price on Pension Overhaul Failure
By Ben Bartenstein , Rachel Gamarski , and Mario Sergio Lima
January 11, 2018, 5:05 PM EST Updated on January 12, 2018, 8:05 AM EST
S&P lowers Brazil long-term rating to BB-; outlook stable
Nation now at same level as Bangladesh, Dominican Republic
Spoiler:
Brazil paid the price for failing to approve President Michel Temer’s flagship pension overhaul as S&P Global Ratings downgraded Latin America’s largest economy further into junk territory.

S&P cut Brazil’s debt rating to BB-, three notches below investment grade and the same as Bangladesh, Macedonia and the Dominican Republic. The outlook is stable, S&P said.

The decision marks a defeat for Finance Minister Henrique Meirelles, who late last year met officials from the three major rating companies to fend off a downgrade. Lower house speaker Rodrigo Maia in recent days criticized those responsible for the pension revamp, an indirect slight at Meirelles that raised concern Temer’s unpopular measures will be further disrupted.


“This gives Meirelles and Maia the strongest argument they could have to convince lawmakers to vote pension reform and other measures to mend the budget gap,” said Andre Perfeito, chief economist at Gradual Investimentos. “Let’s see if they will make a lemonade out of those lemons.”

Brazil’s government gave up on efforts to vote on a social security reorganization in 2017 after struggling for support in Congress, kicking the bill back to this February and raising the prospect that nothing will be done about the country’s ballooning pension obligations until after this year’s October presidential elections.

Following a corruption scandal that undermined Temer’s political capital, the government redoubled efforts to overhaul the costly pension system before lawmakers focus on campaigning. The plan was projected to save almost 400 billion reais ($124.4 billion) over 10 years by introducing a minimum age for retirement of 65 years for men and 62 years for women, among other measures.

“Despite various policy advances by the Temer Administration, Brazil has made slower-than-expected progress in putting in place meaningful legislation to correct structural fiscal slippage and rising debt levels on a timely basis,” S&P analyst Lisa Schineller said in a statement.

Meirelles told Bloomberg that S&P’s decision reinforces the need for Brazil to pass the pension bill and measures already sent to Congress. He said he’s confident that Congress will work in favor of “the reforms and the fiscal adjustment.”

The nation lost S&P’s investment-grade stamp in September 2015 and was further cut into junk in early 2016, a move that was followed by Moody’s Investors Service and Fitch Ratings.


Brazilian financial markets oscillated last year in tandem with the changing fortunes of the pension overhaul plan. Brazil’s real was little changed at 3.2163 per dollar as of 8:03 a.m. in New York Friday as the Ibovespa retreated 0.3 percent. The cost of insuring Brazilian bonds in the credit-default swaps market for five years decreased, while the yield on the nation’s benchmark 10-year bonds rose to 4.5 percent.

The rating cut could also make it more expensive for Brazil to raise money in capital markets while rates are relatively low. Argentina paid 1 percentage point less this month to sell bonds than it did a year ago.

"The absence of cohesive political support for corrective economic measures that we have seen thus far diminishes the prospects for such a solid and prompt response following the 2018 elections," Schineller said.

https://www.reuters.com/article/us-b...KBN1F101Q?il=0

Quote:
S&P cuts Brazil debt rating as pension reform doubts grow
Spoiler:
BRASILIA (Reuters) - Ratings agency Standard & Poor’s cut Brazil’s credit rating further below investment grade on Thursday as doubts grew about a presidential election in October and a push to trim its costly pension system, seen as vital to closing a huge fiscal deficit.

Brazil's President Michel Temer reacts during breakfast with journalists at the Alvorada Palace in Brasilia, Brazil December 22, 2017. REUTERS/Adriano Machado
S&P lowered its long-term rating for Brazil sovereign debt to BB- from BB previously, with a stable outlook, citing less timely and effective policymaking. S&P also cited a risk of greater policy uncertainty after this year’s elections.

The decision underscored concerns that a business-friendly reform agenda proposed by the unpopular President Michel Temer may stall this year as a looming presidential race shortens the legislative calendar.

The Finance Ministry said in a statement that it would continue to push for an overhaul of Brazil’s social security and tax policies, adding that S&P’s decision underscored the urgency of those fiscal reforms.

Finance Minister Henrique Meirelles had met with ratings agencies to try and stave off a downgrade after the government delayed until February a vote on pension reform that had been expected last year.

“I think it’s a warning of the economic and social consequences of not approving pension reform,” said Wellington Moreira Franco, secretary-general for President Michel Temer.

The move by S&P brings its long-term sovereign rating for Brazil three notches below investment grade. Brazil is rated Ba2 by Moody’s Investors Service and BB by Fitch Ratings, both two notches into “junk” territory.

Brazil lost its investment grade rating in 2015 as the country headed into its deepest recession in decades and the government of then-President Dilma Rousseff failed to tame a budget deficit that exploded when a commodities boom faded.

The S&P downgrade “is a negative development but it was expected, particularly after pension reform was delayed. It’s not breaking news for markets,” said Goldman Sachs economist Alberto Ramos in by telephone.

Brazilian index fund iShares MSCI Brazil ETF (EWZ) slipped 0.3 percent in after-market trading in New York after gaining 1.9 percent during the session.

iShares MSCI Brazil ETF
43.18
EWZCONSOLIDATED ISSUE LISTED BY NYSE ARCA
+0.08(+0.19%)
EWZ
EWZ
“Regarding the economic effect, we will need to observe the market in the coming days. But this will aid the reform effort,” a member of Temer’s economic team said on condition of anonymity.

A spokesman for Brazil’s central bank declined to comment.

The downgrade highlights the stakes heading into this year’s wide-open presidential election, with key fiscal measures hanging in the balance and voters seething after years of corruption scandals that tarred major political parties.

Many in Brazil regarded S&P’s decision to award Brazil an investment-grade rating in 2008, then the 14th government to receive the distinction, as validation of the country’s growing leadership among emerging markets.

Since taking office last year, Temer has vowed to regain Brazil’s investment grade by cutting red tape, halting growth of public debt and privatizing state firms.

Yet Temer has struggled to close the deficit and was forced to shelve much of his reform agenda last year as he fought corruption charges that sank his approval rating into single digits.
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  #252  
Old Today, 02:00 PM
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Mary Pat Campbell
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Join Date: Nov 2003
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Favorite beer: Murphy's Irish Stout
Posts: 80,149
Blog Entries: 6
Default

BRAZIL
https://www.reuters.com/article/us-b...KBN1F90QS?il=0
Quote:
Brazil President Temer says pension changes remain on agenda
Spoiler:
SAO PAULO (Reuters) - Brazilian President Michel Temer denied that his administration would give up on passing pension legislation that some in Congress have opposed, according to an interview published on Saturday.

Brazil's President Michel Temer reacts during breakfast with journalists at the Alvorada Palace in Brasilia, Brazil December 22, 2017. REUTERS/Adriano Machado
Temer told newspaper Folha de S.Paulo that approval of the proposal, which raises the retirement age, remained a key target for his administration, even though analysts and politicians say it would be nearly impossible to pass such a bill in an election year.

“I want to say that the possibility to approve the reform is very strong,” Temer said.

“Several congressmen have changed their views,” and the bill is slowly gaining more support, he added.


The pension proposal is seen as critical to reduce Brazil’s large fiscal deficit and guarantee that the government will have resources to pay a growing number of beneficiaries in a country that is getting older.

Temer said his administration “will not end” if the bill fails to pass, since it has other priorities, such as a plan to simplify the tax system.
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