Welfare reform voting still pushing local stocks up
Local stocks are expected to continue trading higher for the third consecutive day as
investors are confident that Congress will approve later in the day three outstanding
points in a landmark Social Security reform bill. The approval of the bill, which is
expected to save the government R$ 4bn, has been considered a key point as it is
expected to show how successful the government will be in pushing through the
measures proposed last week as part of a three-year austerity plan, the Fiscal
Stabilization Program, known as (PEF). The question which will be answered
throughout the day is to what extent Brazil can deliver on its austerity plan. "The
market has shown it believes the government will get the reforms approved," a dealer
told Dow Jones this morning. However, the US-based weekly economic magazine,
Business Week, pointed out on its current edition that the approval of the bill will also
depend on "the support of Brazil's unruly state governors, who are practiced in the art
of trading political influence for pork-barrel projects and other benefits from the
federal government." According to the magazine, President Fernando Henrique
Cardoso will have to "convince the governors that it's in their self-interest, as key
players in Brazil's federal system, to be part of the solution instead of the problem".
And Cardoso has already begun to do that by classifying fiscal package detractors as
demagogues, see related story. But most of all, today is definitely the government's
"D-Day" because, market watchers explains, foreign investors should only return to
the domestic market when words become actions. (By Paulo R. Monterio Dias) |
