The Brazilian market prolongs its romance with Bolsonaro and reaches a new record
The Brazilian market prolonged today the euphoria unleashed after the arrival to the presidency of the far right Jair Bolsonaro and the Stock Exchange of Sao Paulo broke the barrier of 93,000 points, thus adding his fifth record in the six sessions of 2019.
The Ibovespa index of the São Paulo Stock Exchange, benchmark of the parquet, advanced today by 1.72% and stood at 93,613 points, while the dollar fell by 0.72% and was negotiated at 3,688 reais for the purchase and 3,689 reais for the sale in the commercial exchange rate, its lowest level since last October.
The gains intensified on Wednesday after the government offered signs that it will move forward with the reform of the pension and retirement system, the cornerstone of the new president's economic agenda.
The Economy Minister, Paulo Guedes, announced the day before that the Government plans to include the creation of an individual capitalization regime, similar to that of Chile, in the bill that will be sent to Congress to reform the pension system.
The possibility of business that would be opened for the private sector and the positive impact it could have on the large fiscal deficit encouraged the Sao Paulo Stock Exchange, although the market has warned that it will be alert to any type of modification that softens the proposal.
According to the initial plan, the implementation of the system of individual capitalization will be preceded by a reform that will establish a minimum age to access retirement, in order to smooth the transition to the new regime.
The executive has only offered a few touches on the model he will adopt, but the official draft must be presented in the coming weeks.
"One factor conditions the other, the honeymoon will only continue if Bolsonaro approves the reform, and if there are changes, the market can react badly," said Victor Candido, chief economist at Guide Investimento, to Efe.
According to analysts, the good mood of the Sao Paulo Stock Exchange went beyond Brazilian politics and coincided with the optimism extended in international markets, in the midst of the trade negotiations between the United States and China.
In addition, as Candido explained, "the external scenario improved a lot and things are clearer for investors, which has not happened since November."
"The US has shown signs of improvement and investors are encouraging," he added.
Bolsonaro commemorated yesterday the records reached in the stock exchange and assured that his Government is "rescuing" the confidence of the investor in Brazil, a country that in 2017 left behind two years of deep recession in which the GDP accumulated a fall of 7%.
Today, after the new record, the president returned to celebrate the stock results in their social networks: "On the world stage was added optimism in Brazil with the new Government, with fiscal health and economic freedom, we will rescue the confidence in our country! ", he said.
The romance between investors and the new Brazilian president began during the election campaign, when he allied himself with Paulo Guedes, an economist trained at the Chicago School who with his liberal recipe has achieved full market support.
In the first week at the head of the Government, the economic team of Bolsonaro, captained by Guedes, has already announced that it intends to privatize or liquidate some 100 public companies, put an end to the "distortions" in public banking that drastically increased interest and "distorted" "the credit market in the country and sell public buildings to contain the high public spending.
The Government, however, has not yet delved into the details of its shock plan to clean up the country's battered accounts and has incurred some contradictions, which have forced the spokesmen of the Executive to step out and deny any kind of internal dispute in the first days of management.
