We don’t think that the apparent collapse of pension reform in Brazil will have much of a bearing on the economy’s performance over the next 6-12 months. Even so, the current pension system – and by extension Brazil’s fiscal trajectory – is unsustainable. One of two outcomes now looks likely: either the government that emerges from October’s elections manages to push through reforms to the pension system, or the bond market takes fright and the economy falters once again.
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