Brazil’s lower house has delayed its second vote on pension reform, and the Senate is already dragging out its first of two votes, creating investor woes as the stock market dipped.
Things were looking good last week as the Chamber of Deputies approved the overhaul in its first of two voting rounds with expectations that lawmakers would conclude their task before the house broke for its July 18-31 recess. But too many deputies took vacation early, so the lawmakers couldn’t muster a quorum. The second round will now begin on August 6.
The Senate, too, will not be rushing into things. Sen. Simone Tebet said Monday that it will take 60 days to evaluate and decide on the bill the lower house approves.
The bill seeks to save Brazil about $267 billion over the next decade by setting a higher minimum retirement age and more stringent requirements to access their pensions.
House Speaker Rodrigo Maia said the most important thing was getting past the first round before the break.
“No one is the owner of the House staff alone,” he said. “It’s a supra-party construction, and that’s what it was: if I had announced the second-round vote next week, the opposition would have obstructed us and we would not have voted for the highlights.”
Some of the bill’s provisions could change in the second round. Maia expects states and municipalities to again be included in the reform to bolster the overhaul financially. At the moment, he estimates the debt in federal institutions will grow by more than 40 billion reis ($10.6 billion) over the next four years if left unchecked.
News of the delay did not sit well with investors. The Bovespa Index is down nearly 2 percentage points from July 10, when the bill passed in the lower house’s first voting round. Delays and changes have gotten in the way of speedier passage, and the last thing the cash-strapped nation needs is to keep kicking the pension can down the road.
Francisco Reis, a principal consultant at Mercer’s Rio de Janeiro office, thinks the investor discontent over the postponements will subside and the market will rally back soon.
“We see that the market reflects a lot of expectations from the political decisions…but there has been a lot of optimism in the last few days” Reis told CIO. He said investor confidence in the Brazilian economy should be strong as long as lawmakers don’t make any “major changes to the text.”
Like Brazil President Jair Bolsonaro, Reis expects a pension reform to be enacted this year, one way or another.
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