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Brazilian stocks fell on Monday after the government agreed to soften its pension reform proposal to secure Congressional approval. The revised plan yields about 60% of the fiscal savings of the original, versus 75% in the prior version.
The Bovespa index slipped 1.2%, while the real gained 0.4%.
Pension reform is seen as necessary to curb Brazil's public debt, so a weaker bill raises fiscal risk and drives equity volatility. The real's gain against the dollar also shows investors treating the reform's outcome as a currency factor.
ai-cio.comChris ButeraNov 28, 2017After 13 past bearish policy events, Brazilian Real (BRL per USD) moved a median -3.4% over 5 sessions (15% higher; middle half -3.4% to -1.3%), and -1.9% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
Brazil's softened pension reform lowers expected fiscal savings and raises fiscal-risk concerns, which can weaken the real and pressure BRL, although the real actually gained 0.4% on the day and the event predates the 11-30 move by two days.
