May 23, 2019 / 8:17 PM / a year ago

Brazil's Guedes sees 'favorable surprise' on pension reform in 60 days

Brazil's Economy Minister Paulo Guedes speaks during a seminar about pension reform bill in Brasilia, Brazil May 22, 2019. REUTERS/Adriano Machado/File Photo

SAO PAULO (Reuters) - Brazil’s Economy Minister Paulo Guedes said on Thursday he was confident pension reform would be approved in the next 60-90 days, and that it would pack a sufficient fiscal punch.

“We believe it will be approved, and that in 60 days there will be a favorable surprise in the Senate,” Guedes said at an event in Sao Paulo. A climate of collaboration among the political class has replaced the one of division and distrust of recent months, he noted.

“I’m optimistic, I think that in 60 to 90 days this will be passed and we will push ahead with an extraordinarily positive agenda,” he said.

Some Congressional sources, however, say the government remains well short of the 308 votes required in the lower house to even take it up to the Senate, meaning final approval could be several months away.

The bill making its way through the Congress is a sweeping package of measures, including raising the minimum retirement age and increasing workers contributions, which aims to generate savings of 1.237 trillion reais ($306 billion) over the next decade.

The government and many economists say this is vital to boosting investor, consumer and business sentiment, and bringing Brazil’s lackluster economy back to life.

Doubts over President Jair Bolsonaro’s main economic reform are likely to have contributed to the economy shrinking in the first quarter, the first contraction since 2016. The government cut its 2019 growth forecast this week to 1.6% from 2.2%, but even that is above the market consensus of around 1.2%.

But Guedes said these forecasts will be revised up again in two to three months, the same timetable he predicted for pension reform approval.

He said once pension reform is approved, boosting private investment will become the economic “battle front.” Guedes also said Brazil is staying out of the U.S.-China trade spat, and that Brazil will negotiate with both countries.

Reporting by Lais Martins; Writing by Jamie McGeever; Editing by Tom Brown and Richard Chang

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