President Jair Bolsonaro submitted to the National Congress a proposal for a New Pension System. The plan aims to fight inequalities and privileges in the public and private sector pension systems. The government expects to save about R$ 1.1 trillion in ten years under the new rules.
Good expectations about the reform of the pension system have increased the con-fidence of entrepreneurs, investors and con-sumers in relation to the country’s direction.
Calculated by the Getulio Vargas Foundation (FGV), the Entrepreneur Confidence Index reached 98 points in January, a five-year high, while similar indices for industry, trade, services and consumers saw new increases as well. The Consumer Confidence Index, for example, increased for the fourth consecutive month in January to 96.6 points – the highest for the indicator since 2014.
“Pension reform is the country’s watershed. It is what will determine if Brazil will grow more, if interest rates will remain low and if corporate earnings will increase,” Eduardo Velho, chief economist of Go Associados, points out.
The same scenario was also described by Haitong Bank economist Flávio Serrano, who sees pension reform as a key factor of stability and guarantee of economic growth in the future. “The approval of pension reform would generate an additional boost and certainly increase economic growth,” he says.
Buoyed by expectations regarding the economic reforms, Brazil continues to show good results in economic indicators. In 2018, domestic industry out-put grew 1.1%, marking two consecutive yearly increases, while the trade sector closed last year with sales up 2.3%, a five-year high.
At the same time, inflation remains under control and the Selic benchmark interest rate is at a historical low of 6.5% p.a. Reacting to the good moment in the economy, the financial market is even more optimistic.
In Congress, the New Pension System bill will be processed as a Proposed Amendment to the Constitution (PEC). Before being presented for voting by the plenary of the Chamber, it will be reviewed by the Constitution and Justice Committee (CCJ) and a Special Committee. If approved, it will then go to a vote in the Senate, where it will also be reviewed by that house’s CCJ before going for a plenary vote.