Brazilian Real will be strengthened with reforms: Minister of Economy

(Bloomberg) – The Brazilian real will strengthen and the economy will exceed expectations this year as privatizations, investment and structural reforms turn a cyclical rally into a sustained recovery, according to Economy Minister Paulo Guedes.

A long-overdue tax bill is making headway in the legislature, while resistance to a planned restructuring of civil service careers is diminishing, the minister told Bloomberg News on Thursday, predicting both proposals will pass this year. While the first reform is designed to improve Brazil’s business environment, the second seeks to reduce the costs of public officials over time.

“As the reforms progress, everyone will see that the currency is priced incorrectly and that it will strengthen,” Guedes said during a two-hour interview at his Brasilia office. “The currency was exceeded and now it is finding its balance; if it’s going to be 5.0 per dollar, 4.8 per dollar or 3 per dollar … I have my hunch, but I won’t say it. “

The Brazilian currency lost about a quarter of its value in 2020 amid investor concerns about excessive public spending during the pandemic. The recent rise in commodity prices, along with aggressive interest rate hikes by the central bank and improving fiscal prospects have helped prop up the real in recent weeks. It is now up about 5.8% since the end of March, making it the best performing major currency in the world.

Guedes predicts that the largest economy in Latin America, after suffering a recession less painful than its neighbors last year, will surprise again in 2021 with the creation of one million jobs during the first four months of the year.

“Many countries are still on the ground, but Brazil is on its feet and has started walking fast,” he said.

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According to Guedes, the better-than-expected performance should be attributed in part to government programs to help the poor and job protection during the pandemic. Together, those programs put a hole in Brazil’s budget, but what matters is that the Administration has managed to keep recurring expenses under control, he said.

Here are some other key comments from the minister.

Tax reform

President Jair Bolsonaro and the presidents of both houses of Congress have agreed to divide into several chapters a proposal to reform the tax system in order to accelerate its progress Changes in income and consumer taxes will be presented first in the Chamber of Deputies The proposal renegotiation of tax debts will be presented first in the Senate

Eletrobras privatization

The bill allowing the privatization of the electricity company Eletrobras will probably be approved next week, according to Guedes The discussion was delayed because legislators tried to introduce inopportune last minute changes to the text

Original Note: Brazil’s Currency to Strengthen With Reforms, Economy Chief Says

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