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Waiting for the pension reform vote in Brazil

July 4, 2019

It will be important to monitor how these steps will evolve, in order to gauge the timing of the first Lower House floor vote.

Talk of the Day


All eyes remain focused on the pension reform’s special committee. Local news indicate that, after some postponement and intense negotiation yesterday, the pension reform proposal may be voted at the special committee today. As we approach the legislative break (July 18-31), it will be important to monitor how these steps will evolve, in order to gauge the timing of the first Lower House floor vote.

Day Ahead: June’s Anfavea auto production data will be released today.


May’s retail sales (including vehicles) increased 3.3% yoy (-0.7% in April), above both the market consensus and our 1.0% growth forecast. The pickup, however, may be transitory, as promotional events (cyber day/week) and a favorable base of comparison likely boosted activity. Meanwhile, wholesale trade continued to drive commercial activity, as sales of investment-linked materials (machinery, equipment and construction materials) remain elevated. At the margin, retail activity improved as sales (including vehicles) increased 1.9% from April, resulting in growth of 4.0% qoq/saar, following a strong 4.9% decline in 1Q19. Overall, the bounce back of retail activity and manufacturing in the month is likely to be partly offset by surprisingly weak mining activity, resulting in another below potential Imacec print (monthly GDP proxy) of 2.3% in May (2.1% in April). With consumer sentiment entrenched in pessimistic territory amid uninspiring labor market developments, retail activity is unlikely to sustain an elevated rebound. For 2019, we see GDP growth of 2.4%, down from 4% in 2018. ** Full story here.


Export growth slowed in May, as oil exports were hampered by slower volume growth and falling prices. Total exports increased 1.2% yoy (2.0% in April; 10.2% in 2018), reflecting the effects of slowing global growth. Oil exports contracted 2.0% (+21.8% in April; 26.6% in 2018), while coffee exports dropped 26.4%, the sharpest decline since July 2018. Supporting export growth in the month was the 30.0% coal rise (-24.7% previously), favored by a low base of comparison. In the quarter ending in May, exports expanded a mild 0.9% (1.3% decline in 1Q19), despite oil exports expanding 12.9% (4.5% in 1Q19). At the margin, exports increased 29.3% qoq/saar, up from 0.3% in 1Q19, as the acceleration of oil and coal exports was only partly offset by slowing coffee exports. A more challenging global scenario means Colombia’s external account imbalances would persist. We expect a current account deficit of 4.3% of GDP this year (3.9% in 2018).


Day Ahead: At 4:00 PM, manufacturing and construction data for May will be published. We expect to see another year-over-year drop in manufacturing (-8.9% in April).

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