Itaú BBA - Brazilian Lower House establishes the Constitutional and Justice Committee

Latam Talking Points

< Back

Brazilian Lower House establishes the Constitutional and Justice Committee

March 14, 2019

The analysis by the CCJ is the first step towards approving the pension reform, presented by the government to Congress on February 20

Talk of the Day


The Constitutional and Justice Committee (CCJ) was established at the Lower House yesterday. The federal lawmakers Felipe Francischini and Bia Kicis (both from PSL, the government’s party) will be the Committee’s president and vice-president, respectively. The analysis by the CCJ is the first step towards approving the pension reform, presented by the government to Congress on February 20. If approved by the CCJ, the pension reform proposal will then be studied by other special commissions, before being voted on the House floor. 

Also yesterday, Roberto Campos Neto spoke at his inauguration ceremony as the new governor of the BCB. Replacing Ilan Goldfajn, Campos signaled continuity with the previous administration in the conduct of the monetary policy, with caution, serenity and perseverance.

On activity, industrial production fell 0.8% mom/sa in January, disappointing the median of market expectations and our estimate (-0.1%), and reinforcing the perception of weak economic growth in early 2019. Compared to the same month of last year, industrial production receded 2.6% – also below our call (-1.2%) and the market’s (-1.5%). Indicators tracking capital goods and construction material — which are more closely related to investments — declined sharply during the month. Our preliminary estimate for February is a 1.4% increase at the margin. Growth in industrial production should pick up in the coming months, given the recent improvement in financial conditions, faster gains in employment and more credit. For 1Q19’s GDP growth, we expect a 0.5% qoq/sa increase, leading the year-over-year rate to 2.0%.
** Full story here.

Day Ahead: At 9:00 AM, January’s retail sales will come out. Our forecast points to a 0.4% mom/sa gain on both core and broad sales (which includes vehicle sales and construction material), leading to a 1.5% and 2.6% yoy increase, respectively.


Industrial production (IP) fell above our forecasts and market expectations on an annual basis in January. IP fell 0.9% yoy in January (from -2.5% in December), above our forecasts and market expectations (-2.0%). Adjusted by calendar effects, IP growth rate was similar to the headline figure, taking 3 month moving average (3MMA) growth to -1.5% yoy in the quarter ended in January (from -1.2% in December). At the margin, momentum remain weak. With seasonally adjusted figures, industrial production grew 0.6% mom in January (from -0.5% in December). Even so, the quarter-over-quarter annualized growth rate (qoq/saar) was -5.5% (from -6.1% in December).

We expect economic activity to weaken in 2019 (relative to 2018: 2.0%). Uncertainty over domestic policy direction and remaining uncertainties over the approval of NAFTA by the U.S. Congress will continue to weight on investment. Deceleration in the U.S. economy will also curb growth in the manufacturing sector. In turn, we expect private consumption growth rate to moderate its pace in 2019 as the labor market is already deteriorating. Moreover, one-off factors (gasoline shortages and the above-mentioned strikes in some manufacturing firms) can be a drag on 1Q19 GDP.
** Full story here.


Day Ahead: At 4:00 PM, the INDEC will publish the National CPI for February 2019. The consulting firm Elypsis, which tracks consumer prices, has projected a new sequential acceleration in headline inflation for February (4.0% mom).


Day Ahead: Activity indicators for the month of January will be published at 12:00 PM. We expect industrial production to improve to 1.5% yoy, as confidence bounced back, while retail sales growth is likely to moderate to 4.0% in 12 months, as auto sales become a drag and a higher base of comparison is met.

< Back