Brazil’s Bolsonaro signals weaker pension reform, concern over Boeing deal

BRASILIA, (Reuters) - Brazil President Jair Bolsonaro yesterday called for minimum retirement ages significantly lower than those proposed by his predecessor, sparking concerns among investors that he will back watered-down pension reform legislation.

Bolsonaro also said regional security was the basis for his statement on Thursday that he might be willing to allow a U.S. military base on Brazilian soil as a way to counter Russian influence in Venezuela.

The newly inaugurated leader, speaking at an Air Force swearing-in ceremony on Friday, further said he is concerned that the latest proposal for the sale of 80 percent of Embraer’s commercial aviation business to Boeing Co could ultimately lead to the U.S. planemaker owning all of the new venture.

It was the strongest expression of concern so far by his government over the tieup.

Embraer shares were down more than 5 percent in late afternoon trading.

On pension reform, Bolsonaro told reporters at an Air Force event that the minimum retirement age would be 62 for men and 57 for women, effective five years after any legislation is passed.

That is lower than the minimums of 65 years of age for men and 62 for women that were proposed by ex-president Michel Temer.

Later on Friday, Bolsonaro’s Chief of Staff Onyx Lorenzoni appeared to walk back what Bolsonaro said on minimum age requirement, saying it was one option and that no final decision had been made by the president’s economic team.

A reform of Brazil’s bloated pension system will be among Bolsonaro’s biggest challenges, since he has yet to build a base in Congress. It is key to erasing the country’s 130 billion reais ($34.76 billion) public deficit for 2019.

Investors on Friday sent interest rates higher on futures markets, showing disappointment about the lower-than-expected minimum age. The head of one major foreign bank’s treasury desk saying that “it was not expected by the market and its unambitious, to say the least.”

Bolsonaro told reporters his government would have to raise the IOF tax on financial transactions to compensate for tax breaks extended to Brazil’s poor north and northeast. But tax revenue secretary Marcos Cintra later said that would not be necessary, after meeting with the president.

Since his inauguration on Tuesday, Bolsonaro has used executive orders to open up Brazil’s economy, crack down on violent drug gangs and redraw the country’s foreign policy while pushing conservative social measures.