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BRAZIL: Lula Waits On New Congress Leaders Before Income Tax Reform Talks Resume

BRAZIL
  • Finance Minister Haddad said earlier that President Lula will wait for new leaders for the lower and upper houses of Congress to be picked before resuming talks on income tax reform. The priority now is to vote on the 2025 budget, he said. Despite the delay, as well as Trump’s denial that he plans to pare back his trade tariff policy, BRL continues to trade on the front foot, with USDBRL 1.3% lower on the day at typing, approaching 6.10.
  • Separately, Valor international reports that currency interventions conducted by the BCB in December reduced international reserves by $33.3bn in one month, bringing the total to $329.7bn by the end of 2024. Last month, the BCB held nine spot dollar auctions, totalling $21.574bn and five “line” auctions (with a repurchase agreement) totalling $11bn. Despite the decline, analysts say that total reserves remain healthy.
  • DI swap rates have also fallen by 10-15bp in the belly and long-end of the curve today, with yields in the 2y segment now around 15.4%. Earlier, analysts raised their Selic rate forecast for this year by another 25bp to 15.0%, according to the BCB Focus survey. Looking ahead, attention turns November IP and retail sales data this week, followed by December IPCA inflation figures on Friday.
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  • Finance Minister Haddad said earlier that President Lula will wait for new leaders for the lower and upper houses of Congress to be picked before resuming talks on income tax reform. The priority now is to vote on the 2025 budget, he said. Despite the delay, as well as Trump’s denial that he plans to pare back his trade tariff policy, BRL continues to trade on the front foot, with USDBRL 1.3% lower on the day at typing, approaching 6.10.
  • Separately, Valor international reports that currency interventions conducted by the BCB in December reduced international reserves by $33.3bn in one month, bringing the total to $329.7bn by the end of 2024. Last month, the BCB held nine spot dollar auctions, totalling $21.574bn and five “line” auctions (with a repurchase agreement) totalling $11bn. Despite the decline, analysts say that total reserves remain healthy.
  • DI swap rates have also fallen by 10-15bp in the belly and long-end of the curve today, with yields in the 2y segment now around 15.4%. Earlier, analysts raised their Selic rate forecast for this year by another 25bp to 15.0%, according to the BCB Focus survey. Looking ahead, attention turns November IP and retail sales data this week, followed by December IPCA inflation figures on Friday.