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Ministry Sees Risk of Recession if Pension Reform Bill Is Not Approved

11/27/2017 - 11h16

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FROM SÃO PAULO

A report conducted by the Planning Ministry assesses that if the pension reform bill is not approved by next year, the country will face yet another recession in 2019.

The payment of pensions is the federal government's biggest expense. In order to tackle an ever-increasing deficit – which, according to official numbers, will reach R$ 184 billion (US$ 57 billion) by the end of the year – the federal government will be forced to take out further loans in order to cover its pension obligations.

Alan Marques/Folhapress
Minister of Planning, Dyogo Oliveira
Minister of Planning, Dyogo Oliveira

The report, which was elaborated by the Ministry's own Secretary of Economic Planning, indicates that if Brazil fails to control the deficit, then investors will perceive investments in Brazil as risky, thus leading to higher interest and inflation rates, as well as a decrease in terms of family income.

"Inflation will once again affect consumers", said Minister of Planning, Dyogo Oliveira, who presented the report to Folha.

One of the indicators that was taken into consideration was the CDS indicator (Credit Default Swap), a type of bond that can be used to measure a country's risk of defaulting, which, in the case of Brazil, surpassed 400 points right before the tense political environment surrounding the impeachment of former president Dilma Rousseff, back in 2016.

The CDS rating has since dropped to 180 points following measures such as the cap on spending, which has imposed a series of rules to help keep government spending in check.

Translated by THOMAS MATHEWSON

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