adplus-dvertising
Connect with us

Economy

Brazil’s Zero-Deficit Target Unlikely to Survive Slowing Economy

Published

 on

(Bloomberg) — It’s only a matter of time until President Luiz Inacio Lula da Silva ditches his own government’s zero-deficit fiscal target to keep spending big as Latin American’s largest economy loses steam next year, according to Genial Investimentos.

Assurances by the ruling Workers’ Party that it will respect Finance Minister Fernando Haddad’s strategy to eliminate Brazil’s primary fiscal deficit in 2024 will not hold true as public spending will outpace tax collection, Jose Marcio Camargo, chief economist at Genial, said in an interview in Rio de Janeiro.

“The target will have to change if Haddad is unable to increase tax revenue,” he said. “The question now is when and by how much.”

Camargo, 76, knows the benefits of social spending — he’s one of the designers of Lula’s flagship Bolsa Familia program which provides income transfers and helped lift millions of Brazilians out of poverty two decades ago. But he’s also worried about the impact of excessive government spending on public debt and creditworthiness.

For weeks, investors have been on edge after Lula indicated he’d rather ditch the zero-deficit target, which doesn’t take into account interest payments, than make cuts to investments and programs he considers essential to improve Brazilians’ living standards. While other fiscal rules approved earlier this year ensure public spending won’t get out of control, a strict deficit goal would also limit lawmakers’ ability to pass tax cuts and subsidies.

Haddad has since been trying to salvage the proposal by cajoling Lula’s allies and members of Congress into helping him plug a budgetary gap through tax hikes and other measures to boost revenue. On Thursday, a member of Lula’s cabinet said the 2024 primary budget deficit would indeed be zeroed.

Read more: Lula to Keep Zero-Deficit Goal in Budget Plan, Minister Says

Bracing for the Worst

But the government can still make changes to the proposal. And with Brazil’s public finances already deteriorating, Camargo says investors are bracing for the worst.

In September, Brazil posted a primary budget gap of 18 million reais, the fifth straight month the government ran a deficit. Congress has yet to approve measures that would help generate the 168 billion reais ($34.5 billion) in new revenues that Haddad is seeking to fulfill his budget proposal. Meanwhile, social expenditures like the minimum wage and pensions are set to increase.

“The market is very concerned about how the fiscal issue will evolve,” Camargo said. Without a credible target no one will be able to keep tabs on spending and “we’re going back to a scenario like we had at the beginning of 2023.”

At the start of the year, Brazil’s Congress lifted a constitutional spending limit, allowing billions of dollars to be doled out to aid poor Brazilians. That whipsawed markets.

Spending fears waned with the August passage of the fiscal framework bill, a set of rules proposed by Haddad to shore up public finances. Investors expected the law would mitigate the tail risk that public debt spirals out of control. Currently, the government’s debt-to-gross-domestic-product ratio is running at nearly 75%, according to data compiled by Bloomberg.

Now, with Lula vowing to maintain spending regardless of tax revenues, “You can no longer calculate how debt will evolve against GDP,” Camargo said, adding that the government could adjust the target as soon as March.

On top of a volatile global outlook, marked by high interest rates in the US and a possible slowdown of China’s economy, Camargo says Brazil’s fiscal performance will determine the direction of its assets next year. Markets have rallied recently on Brazil’s central bank cutting rates and on bets that the Federal Reserve will soon follow suit.

For Camargo, the fear of many market participants is that Lula may follow in the footsteps of his hand-picked successor Dilma Rouseff, who doubled down on fiscal stimulus to avoid a recession last decade.

“Will he continue to increase spending, and with it the deficit, to keep the economy from decelerating? That would be disaster.”

Read More: Brazil’s Economy Unexpectedly Shrinks as High Rates Take a Toll

Genial is headquartered in Sao Paulo and offers banking, brokerage and asset management services. It has 170 billion reais in assets under custody, and oversees 45 billion reais under its money management unit, Plural Gestao.

–With assistance from Robert Jameson.

 

728x90x4

Source link

Continue Reading

Business

A timeline of events in the bread price-fixing scandal

Published

 on

 

Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

S&P/TSX composite up more than 250 points, U.S. stock markets also higher

Published

 on

 

TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

Source link

Continue Reading

Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

 on

 

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

Source link

Continue Reading

Trending