Brazil’s Pension Bill Bound to Lower House Floor Vote Next Week
Brazil Congress Committee Backs Pension Reform as Assets Jump
(Bloomberg) -- President Jair Bolsonaro’s flagship pension reform proposal passed a key congressional committee, fueling investor bets that the bill can be approved by the lower house before lawmakers go into mid-year recess later this month.
The committee, the last step before the proposal moves to the lower house floor, backed the report prepared by pension bill rapporteur Samuel Moreira by 36 to 13 votes Thursday afternoon. In a session that extended well past midnight on Friday, lawmakers rejected all but two amendments to the bill. According to O Globo newspaper, the changes reduce by 83 billion reais the reform’s projected savings of roughly 1 trillion reais ($261 billion) over the next 10 years.
The committee vote capped a tumultuous week of delays and negotiations that prompted local assets to whipsaw as investors digested news on the closely-watched bill. One of President Jair Bolsonaro’s top policy priorities, the pension reform is seen as key to staunching the bleeding in the country’s public accounts and also may put Brazil back on the path to recovering its investment-grade status.
The Brazilian real traded at its strongest level since March, after leading gains among emerging market currencies on Thursday. The Ibovespa benchmark stock ended Thursday at an all-time high of 103,636 points.
Read More: Expectations for Brazil’s Social Security Reform
Presented by Bolsonaro in February, the pension overhaul seeks to save billions of dollars by establishing a minimum retirement age and toughening access to benefits. In recent days, progress has been slowed by debate on rules for workers including police officers and teachers, as well as by lawmaker pressure for budget funds in exchange for their support.
Meanwhile, investors betting that a monetary easing cycle can start in July are also counting on the reform to clear at least the first of two lower house floor votes this month after the central bank indicated it needs concrete signs that the economic agenda is advancing in order to cut its benchmark interest rate. Traders are pricing in about 80% chances of a rate cut in July.
Read More: Floor Vote Date May Unlock Fresh Gains for Brazil Assets
Lower house Speaker Rodrigo Maia said on Wednesday he hopes to bring the bill to a floor vote next week. As a constitutional amendment, the pension reform needs to be approved in two separate votes in the lower house and two additional votes in the Senate in order to become law.
--With assistance from Murilo Fagundes and Mario Sergio Lima.
To contact the reporters on this story: Samy Adghirni in Brasilia Newsroom at sadghirni@bloomberg.net;Fernando Travaglini in in São Paulo at ftravaglini@bloomberg.net
To contact the editors responsible for this story: Walter Brandimarte at wbrandimarte@bloomberg.net, ;Julia Leite at jleite3@bloomberg.net, Matthew Malinowski
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