Spain – Brazil
Brazilian Finance Minister Henrique Meirelles has sent a bill to Congress aimed at helping states facing fiscal crises, a bill that will be debated in the first half of March.
According to the bill, a three-year moratorium on debt payments to the central government and banks would be allowed in exchange for freezing salaries and hiring, privatizing some public services and banks, and cutting tax incentives and subsidies. President Michel Temer vetoed an earlier version of the bill because Congress amended the text to remove austerity requirements. However, the implementation of austerity measures is inevitable, and this, combined with federal spending cuts, weakens growth prospects. The state of Rio de Janeiro is particularly affected, and Minas Gerais and Rio Grande do Sul have also declared a state of financial calamity. Despite this, the Rio Assembly had previously refused to vote on austerity measures. It recently authorized the privatization of the state-owned water company.
• Interest rate cut. Brazil's Central Bank has cut its benchmark Selic interest rate by 75 basis points to 12,25%. The drop in inflation, which in February registered an annualized rate of 5,02%, the lowest in the last five years, has facilitated monetary easing. Brazilian inflation is expected to end 2017 below the official target of 4,5%. It is quite possible that the monetary authority will face pressure to loosen monetary policy and promote growth, but everything will depend on inflation remaining under control. Some analysts predict a single-digit Selic interest rate by the end of the year.
Source: CESCE
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