Brazil Government Loses Popularity in Global Financial Markets

By Arkady Petrov

RIO DE JANEIRO, BRAZIL – The approval of Jair Bolsonaro’s government among financial market agents fell between April and May, according to a survey conducted by XP Investments with 79 resource managers, economists, and consultants, conducted between the 22nd and the 24th of this month.

While the percentage of those who consider the government good or great fell from 28 to 14 percent and the rate of those who evaluate the government as average fell from 48 to 43 percent, negative assessments (bad or terrible) rose to 43 from 24 percent in the previous survey.

Expectations regarding the administration have also fallen.

The sum of good or great fell from 60 to 27 percent between April and May. Bad and terrible rose from 13 to 23 percent, but average assessments rose from 28 to 51 percent.

On the other hand, the financial market’s analysis of the National Congress has improved in comparison with April.

The percentage of agents who evaluated the actions of Congress as good or great rose from 15 to 32 percent, whereas the group who evaluated Parliament as bad or terrible fell from 40 to 25 percent.

Regarding approval of pension reform, confidence remains high.

Of the 79 agents who were surveyed, 80 percent claimed they believe the proposal will be approved in 2019, the same percentage recorded in the February survey.

Similarly, the median expectation in the economic reforms is at R$700 (US$175) billion in ten years, a reduction of R$537 billion compared to the original project.

The majority of agents believe the reforms will be put to the vote in the special committee
between June and July (80 percent) whereas 20 percent believe this will occur between August and December.

The first vote in the Chamber will probably occur between August and September according to 85 percent of those surveyed, whereas 6 percent believe this will happen before the July recess and 9 percent in the fourth quarter.

Final approval in Congress will take place in the fourth quarter according to 71 percent of the participants, whereas 19 percent believe it will be approved in the third quarter and 10 percent in 2020 or after.

According to XP’s survey, if pension reform with 50 percent of the impact of the initial proposal is approved, the stock market index stands to rise 7 percent to 100,000 points, and the exchange rate would appreciate 3 percent, to R$3.90.

In case the proposal is approved as proposed by the government, the stock market could rise 28 percent to 120,000 points, and the exchange rate could appreciate 10 percent, to R$3.60.

On the other hand, without the approval of pension reform, the stock market would plummet 20 percent to 75,000 points, and the exchange rate would rise 12 percent to R$4.50.

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