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BRAZIL: Senate Approves Payroll Tax Exemption Bill, More Comments on BCB Hikes

BRAZIL
  • The Federal Senate approved the bill that guarantees relief from payroll of 17 sectors of the economy and measures to compensate the tax exemption. The proposal still needs to be approved by the Lower House. Bloomberg note that the Supreme Court has established that measures must be approved by Congress until Sep 11.
    • The government’s priority is to conclude the vote on tax reform in both houses of Congress this year, Institutional Relations Minister Alexandre Padilha said to journalists.
  • Tuesday’s BTG Pactual event saw further comments on the potential for BCB tightening. SPX Capital CEO said an interest rate hike, even if the cycle is short, would be positive for Brazil in the short-term as it would reinforce the Central Bank’s credibility. He added that Galipolo is in a “very comfortable situation to hike rates”.
  • Separately, the CEO and CIO of Verde Asset Management said that Galipolo ‘went too far’ in his hawkish statements when he mentioned that interest rate hikes are on the table, which places the BCB in a “corner”. He added that he expects the central bank to raise interest rates at the September meeting because Verde’s view on the fiscal situation is much worse than what the market is buying”.
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