What worries investors so much?

SAO PAULO – The Ibovespa closed on Tuesday (29) and accumulated a fall of 3.52% in both days of this week due to the government announcement on how the Citizen Income program would be financed. The decision to use the preventive extension and Fundeb to pay for the replacement of the Emergency Aid was not well received by investors and raises the alert for Brazilian fiscal health in the future.

Why was there such a strong movement of stock sales and purchases of Brazilian dollars after this announcement?

Rachel de Sá, macroeconomics analyst at XP Investimentos, wrote in a report that because court orders are mandatory expenses arising from a legal instrument provided for in the Constitution, even in the face of a constitutional change at the time of payment, these debts they must be settled. finally paid.

“According to the Fiscal Responsibility Law, unpaid debts will be incorporated into the public debt. In this way, the R $ 38.65 billion of unpaid debts in 2021 will be effectively ‘pushed forward’ and interest will be charged. Depending on whether the proposal is temporary or permanent, this dynamic would gradually turn perverse, weighing on the already high public debt, ”explains Rachel.

In other words, the already worrying trajectory of the increase in public debt in Brazil would be aggravated by the use of precautions in the financing of social programs.

In addition, Rachel de Sá believes that limiting the payment of court orders to 2% of current net income would increase legal uncertainty about such a legal instrument, which today is the basis of a relevant investment industry.

“The Union would be equalizing the situation that is found today in states and municipalities, whose high fiscal deterioration and the inability to issue debt led to an equally limited payment, increasing legal uncertainty about the payment of said debts.”

Júlio Erse, Managing Director of Constância Investimentos, highlights that one of the biggest concerns is the situation of the Minister of Economy, Paulo Guedes.

“Paulo Guedes’s narrative on fiscal austerity has always been explicit and this adjustment that flirts with a leak in the roof is one more example of the weakening of the minister, with uncertain repercussions for his permanence in office,” he argues.

For the Levante Ideias de Investimento analysis team, both the use of Fundeb resources and precatoriosis, which are extraordinary expenses, to cover current expenses, the government is approaching the recent past of fiscal pedaling.

“The two suggestions bring the government dangerously close to getting back on track with the Budget, with known consequences. Excessive spending raises debt relative to Gross Domestic Product (GDP), increases risk perception and alienates international investors. This depreciates the real against the dollar and causes share prices to fall. “

At the same time that the details of the Citizen Income were released, the minister said that the idea of ​​creating a new tax on digital transactions in line with the CPMF is being discussed, but there is no consensus on the use of the instrument to compensate payroll tax. of payment.

The Travelex Bank analysis team estimates that Guedes’ attrition tends to intensify because, in addition to the reform, his attempt to include a new tax was currently impossible.

According to Erse, the hope now is that the government will return. According to him, it would not be the first time that the Bolsonaro administration has prevented the news from consolidating after the negative repercussions.

“All of this can be reassessed, it’s like when Bolsonaro said that he would not transfer income from the poor to the poor.”

It was precisely this hope that lifted the stock market until lunchtime today. However, Márcio Bittar (MDB-AC), rapporteur for the Proposed Amendment to the Constitution (PEC) of the Federative Pact, reiterated that the Fundeb and the precautions will be used to finance the Citizen Income. “I spoke to the president today and he said he is strong,” Bittar said.

The confirmation alienated investors from the latter possibility of relief, making the fall in equity asset prices inevitable.

The Ibovespa closed today with a fall of 1.15% to 93,580 points with a financial volume of R $ 23,437 billion. It was the lowest benchmark closing level since June 16, when the index closed the session trading at 93,531 points.

Meanwhile, the commercial dollar rose 0.14% to R $ 5.6400 on the purchase and R $ 5.6410 on the sale. The US dollar maturing in October traded with a slight decrease of 0.25% to R $ 5,648 in the Secondary market.

In the future interest market, the ID of January 2022 rose six basis points to 3.17%, the ID of January 2023 advanced nine basis points to 4.68%, the ID of January 2025 ended stable at 6, 65% and the ID of January 2027 registered a negative variation of three basis points to 7.63%.

The day on the international stock markets was a slight loss after yesterday’s rebound. The caution is motivated by the first presidential debate in the United States at a time when the world reaches one million deaths from the coronavirus. Republican Donald Trump and Democrat Joe Biden will go head-to-head in Cleveland, Ohio, at 10 p.m. ET.

Last night, Democrats unveiled a $ 2.2 trillion stimulus package, smaller than originally proposed, but above what Republican leaders were offering.

In Europe, the pound is advancing amid speculation that successful Brexit trade talks could help shield the UK from a confusing break with the European Union.

New CPMF postponed

Another important issue is the creation of a new payment tax, similar to the old CPMF. So far, the idea has not received the necessary support from President Bolsonaro’s parliamentary base.

Thus, according to sheet, the delivery of the second phase of the tax reform proposal was postponed again. According to the government leader in the Chamber, the Executive will only present the text if there are 340 favorable votes.

In addition, the news that the federal public debt increased 1.56% and reached R $ 4.412 trillion in August is noteworthy. Although certain indicators show an improvement due to a more favorable external environment, the National Treasury affirms that there is uncertainty for investors about the Brazilian public accounts. This has limited numbers and long-term pressured interest rates, according to sheet.

As for the vacancy in the Federal Supreme Court (STF), the expectation is that Bolsonaro will make a statement at the last minute to prevent the chosen name from being exposed to public wear and tear. This is because the anticipation of Celso de Mello’s retirement generated pressure from political, legal and evangelical groups on President Bolsonaro, according to the Status. In the Senate, the expectation is that the appointment will occur around October 15.

Another focus of attention is the decisions announced yesterday by the National Council for the Environment (Conama) to revoke the protection against deforestation in mangroves and sandy areas. Shortly after being presented, the measures were the subject of a series of judicial issues, according to the Status.

Corporate radar

In the corporate sphere, Boa Vista confirmed an IPO price of R $ 12.20 per share, in the center of the indicative range, in an offer that moved R $ 2.17 billion. Hapvida announced the purchase of Grupo Santa Filomena for R $ 45 million, while Vale reported the payment of US $ 5 billion of its revolving credit lines maturing in June 2022 and December 2024.

Higher highs

Higher number of casualties

The IRB prepares a simple debenture issue, in two series, for an amount of up to R $ 900 million. Furthermore, Braskem was evaluated by the Instituto do Meio Ambiente de Alagoas, while CCR and EzTec will pay dividends.

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