Brazil's Pension Bill to Lure Investments

back

Want to support Global Action on Aging?

Click below:

Thanks!

Brazil's Pension Bill to Lure Investments

Bloomberg News

May 28, 2003

Brazilian President Luiz Inacio Lula da Silva's efforts to overhaul the nation's pension system and slow inflation will likely lead to more U.S. investment in the country, the head of the biggest U.S. pension fund said.

``We think that the new government is very positive toward attracting new investments to Brazil,'' Sean Harrigan, president of the California Public Employees' Retirement System, known as Calpers, said at a conference about making investments in Brazil being held in Rio de Janeiro.

An endorsement by Calpers, which has $138 billion invested worldwide, may encourage other foreign funds to boost investments in Brazil, pension fund executives said. Lula's efforts to keep consumer prices in check and reduce government spending bolstered investors' confidence, fueling an 18 percent rally in Brazil's benchmark Bovespa stock index this year.

``Based on what's occurred since the Lula administration took office, it's going to improve the environment for institutional investors like Calpers to make additional investments in Brazil,'' Harrigan said.

Brazil still needs to enforce laws that protect the rights of workers and adopt international accounting standards to attract more long-term foreign investment, said Harrigan, who's also a vice president of the U.S. branch of the United Food and Commercial Workers International Union.

``While we consider Brazil to be a country that will support our investments, there is always room for improvement,'' Harrigan said.

Currency Gains

Optimism about Lula's policies have helped push up the value of the currency 18 percent against the dollar this year after it dropped by a third in 2002, as banks restored credit lines and investors bought stocks and bonds.

Harrigan wouldn't say whether Calpers plans to boost its holdings in Brazil, which total $228 million and include investments in about 60 companies. The pension fund has $8.1 billion invested in emerging markets.

Brazil's Bovespa stock index has gained 39 percent this year in dollar terms, the second-best performer in the world among 62 indexes tracked by Bloomberg after Argentina's Merval index.

``We're bullish about Brazil,'' Nicholas Brady, chairman of Darby Overseas Investment, said in a pre-recorded video address to the conference. ``Today it's clear the Brazilian economy is improving and enjoying strong investor support.''

Brady, a former U.S. Treasury Secretary who helped design the debt restructuring for Brazil and other Latin American countries in the 1980s, also said the social security reform and reduction of government spending is critical for Brazil to continue to attract more foreign capital.