Brazilian Congress Opens Door to Business-Friendly Reforms

    Brazilian equities were little changed, following recent strength. Brazil’s market ebbed, as investors largely overlooked an as-expected interest rate hike. Brazil’s benchmark Bovespa Index slipped 26.78 points, or 0.11%.

    Brazilian shares declined on profit taking following recent gains. Additionally, investor concern was aroused by news that Carlos Lessa resigned as president of the Brazilian Development Bank, to be replaced by Planning Minister Guido Mantega.

    Yesterday, in a widely anticipated move, Brazil’s central bank unanimously voted to raise the benchmark Selic interest rate to 17.25% from 16.75%.

    While the bank set no bias for future interest rate policy, it did note that the latest increase continues “a process of adjustment in the basic interest rate begun at the September meeting.”

    Additionally, last night, the Senate voted to approve a broad court reform bill in what could amount to the first in a series of congressional votes on business-favorable reforms.

    The court reform should help speed up Brazil’s rusty judiciary, and, if successful, could help streamline most civil cases. Today, a Senate committee passed a bill forming mixed private-public companies for infrastructure projects.

    The bill, once passed by both houses of Congress, could produce a surge in much-needed projects for Brazil’s outdated infrastructure.

    On the inflationary front, Sao Paulo’s Fipe research institute said that inflation in Brazil’s largest city continues to rise, primarily due to transportation costs, with the Fipe inflation index gaining 0.68% over the four weeks ended November 14.

    That marked the sixth consecutive increase, following the 0.65% rise in the four weeks ended November 7.

    Also, Brazil’s General Price Index jumped to 0.60% in the period from the first 10 days of November to the first 10 days of October, up from 0.12% in the comparable early-October to early-September period, according to the private Getúlio Vargas Foundation. Increasing transportation costs were cited for the rise in the IGP-M.

    Thomson Financial Corporate Group



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