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NEW PENSION REFORM – GREAT FOR INVESTORS

NEW PENSION REFORM – GREAT FOR INVESTORS

Overview

Before the pension reform is implemented, Brazil’s retirement age for men, who contributed into the country’s pension system for 15 years is 65 years old. for women, it is 60. However, men can retire earlier if they pay into the system for 35 years.
 
On the other hand, women have to contribute into the system for 30 years to receive their pensions. As a consequence, this has pushed down Brazil’s average retirement age to the early-to-mid 50s. The reform proposes that the minimum retirement age will be raised to 65 years for men. Also, 62 years for women having to pay more money for a longer period of time into the system.
 

Better conditions for foreign investors

House Speaker Rodrigo Maia said that the reform will bring investors to the country. “I’m increasingly convinced of the necessity of reform,” he said. “This is a historic moment for all of us.”
 
The pension reform aims to improve Brazil’s public debt. The landmark bill aims to save the Treasury around 1 trillion reais ($267 billion) over the next decade, boost investment and carry on growing economy.
 
Brazil is a very popular destination to invest in, because of its obvious benefits. R$42 billion (around $12 billion) is supposed to get injected into the economy over the next 18 months.
 
Brazilian stocks suddenly increased while the real strengthened as investors began to see the public finances of Latin America’s largest economy move onto a more sustainable footing.
 
“The larger-than-expected pension reform is likely to be voted in congress sometime in the third quarter, boding well for asset prices in Brazil,” says Federico Kaune, head of emerging markets fixed income at UBS Asset Management. That means Brazil’s currency, equities in its biggest corporations and its bond prices will see stronger pricing as U.S. investors continue liking Brazil.
 
Brazil’s low interest rates are expected to go even lower. This will keep investors happy, and will make capital costs cheaper for Brazilian corporations. Lower credit costs coupled with the expectation that a pension reform law is signed by Bolsonaro this year which has made Brazil one of the best investments in all of the emerging markets this year.
 
“Tax reform will have the potential to boost the investor’s confidence,” adds Ferrarezi. “It will also pave the way for stronger, more sustainable growth in 2020.”
 
(Source: Forbes and Reuters)

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