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Lower House Of Congress Approves Tax Reform Bill

BRAZIL
  • The lower house of Congress approved a modified version of the government’s tax reform bill today, including plans to exempt certain food products from the two new VAT rates. In addition, if the sum of the two levies exceeds 26.5%, the lower house included a mechanism in the bill that will require the executive branch to send a complementary bill to Congress proposing a reduction in rates.
  • Meanwhile, O Globo report that Finance Minister Haddad is set to send President Lula a plan specifying how the previously announced BRL 25.9bn in spending cuts will be made. The modified bill will now be sent to the Senate for approval.
  • Despite these supportive developments, DI swap rates are underperforming the move in core yields today, following the much stronger-than-expected Brazilian retail sales data earlier. Front-end yields are around 2bp lower, while USDBRL has recovered from earlier losses and is now trading ~0.2% higher on the day.

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