Dear Friends,

In the beginning of almost all administrations confusion and disarray have free rein. The transition period, it is assumed, is the time to precisely build buffers to reduce impacts and greater compromises of the functioning of the Government. For the Bolsonaro administration, it could not be different, especially with the promises of radical changes. However, even in this moment of transition and accommodations, some “mistakes” should have actually been avoided, such as the episode involving Minister Bebianno’s dismissal.

One can only expect, however, that a highly skilled government learns quickly, and more, to anticipate more compromising situations, especially those that may tarnish its major purposes from the outset. Among these purposes we can cite, clearly and unequivocally, its credibility and the build-up of its support basis in parliament. At this moment, the Bolsonaro administration bets all of its chips on the construction of a robust and fair Social Security reform that attacks the inequality of benefits and helps reorganize the public accounts.

Markets have thus reacted very well to the first presentation of what could be approved as a Social Security reform. The Ibovespa temporarily continued its upward movement, peaking at 98,588.63 points on FEB 4th, although it closed the month at -1.86%. The Brazil-risk measured by the 5-year CDS fell further throughout the month to 156.22 points, while the Dollar did not cool down as expected, closing the month at BRL 3.7738. Nominal interest rates up to 2027 were around 8.37%, and the longer NTN-Bs are paying interests as high as 3.99%. Therefore even amid the initial confusions, noises do not speak louder than the first rearrangements, but one cannot lower one’s guard for a moment, for the future necessarily depends on overcoming these challenges.


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