The emerging shape of the new administration

Can the incoming administration of President-elect Jair Bolsonaro lead Brazil out of the doldrums? Bolsonaro offered some clues this week. One clue—he acted quickly.

Lack of details keeps banks cautious about Bolsonaro’s plans

Despite the financial market’s initial euphoria with the first-round results of the elections, executives at retail banks are cautious about a possible administration of Jair Bolsonaro (Social Liberal Party, PSL). They consider that, even though the candidate’s proposals for the economy point to the direction they consider correct, there is still little clarity about how they will be implemented.

Mr. Bolsonaro has the benefit of the doubt, even because the sector rejects the economic policy adopted in the administration of Dilma Rousseff, who is of the same Workers’ Party (PT) of runoff contender Fernando Haddad. Yet six bankers who spoke with Valor — especially those linked to the lending market — expect more details of the measures and reckon the real economy will take time to react in a more consistent way.

Recession Risk is Low for 2019

The Brazilian economy’s recovery is slow and fragile but the risk today of a new recession is “very low,” says economist Marcelle Chauvet, of the University of California, Riverside.

"The factors of uncertainty, which are several, do not cause a recession; they act as if it were a brake on production and consumption," says Ms. Chauvet, a member of the Brazilian Economic Cycles Dating Committee (Codace) of Fundação Getulio Vargas (FGV).

For 2019, she sees an open scenario for the Brazilian economy but cannot rule out a recession or a stronger growth of activity depending on the electoral outcome.

Guardia urges pension reform still in 2018

Eduardo Guardia

In meetings with the advisers of the leading presidential candidates, Finance Minister Eduardo Guardia and Central Bank president Ilan Goldfajn have said that the pension reform that is in Congress can and should be passed right after the elections, still in the months of November and December, as long as the president to be elected in October is in agreement. The reform is the passport to a gradual adjustment of public accounts. And without it “there is no way,” Mr. Guardia said and repeated.

“It is a luxury, at this point in the race, to be able to speak still of gradual adjustment. Most countries were not able to do it. Look at what happened in Argentina! We will be able if the reform bill passes and there is commitment to the spending cap,” Mr. Guardia assured to Valor. Then, if the new president wants to make more changes in the pension regime, he or she can do it, but having already approved a minimum.

Salários devem crescer com a economia, diz Arminio

Chamado ao debate pela presidente Dilma Rousseff, candidata à reeleição, o ex-presidente do Banco Central, Arminio Fraga, escolhido para ser o ministro da Fazenda de um eventual governo Aécio Neves, afirma que tal como proposto pela campanha do PT, tal comparação é "rasteira" e uma tentativa de "fugir do debate".

O cerne da questão é recuperar a capacidade do país de crescer. "Para os salários continuarem a crescer, para os programas sociais continuarem a crescer, é preciso que a economia cresça". Para ele, apesar de todos os progressos o Brasil continua a ser um país "tremendamente desigual".