The dollar exchange rate reached R$6 in the morning and early afternoon after the Minister (Finance) detailed the spending cut package that involves, among other measures, increasing the Income Tax exemption range for those earning up to R$5 thousand.
The currency opened trading at R$5.99, dropped to R$5.96, but shot up to R$6 at the end of the morning and spent the rest of the period fluctuating until the opening high. Around 12:30 pm it was priced at R$5.99, an increase of 1.38%. At 1:10 pm and 1:34 pm it reached R$6 again until it oscillated downwards again.
The São Paulo stock exchange — B3 — opened trading with a drop of 0.33% with slight variations, in the range of 127 thousand points. However, it dropped throughout the morning and reached -1.24%, with 126 thousand points (the lowest until lunchtime).
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Although the exemption will only come into effect in 2026 if Congress approves it in 2025, the financial market is already pricing it. The reduction in taxation on one side will be offset by a higher tax on the other, for those earning more than R$50,000. In addition to these measures, there is distrust of how the legislature will receive Haddad’s proposals which, according to the government, aim to save up to R$70 billion over the next two years.
There is fear that the proposal will be dehydrated during the processing. The government promises to make an effort to make the measures pass, with Haddad already starting negotiations. He met with leaders of the Chamber of Deputies on Wednesday night (27) and .
According to an investigation by the Bloombergthe increase of R$ 5.99 at the beginning of trading this Thursday (28) even surpassed that recorded in the middle of negotiations in May 2020 during the Covid-19 pandemic, when it reached R$ 5.97. “It fell 19% this year, the worst in emerging markets”, points out the agency’s analysis.
In addition to the dollar, the Euro price also opened the day with a strong increase of R$6.32, operating at around R$6.27 for the remainder of the beginning of the trading session.
The spending cut package had been heavily demanded by the financial market and was stuck especially in the last three weeks, with intense negotiations between the Treasury, the president (PT) and ministers mainly from the social area, who even threatened dismissal if they were affected.
and the government’s firmness in implementation. There is a risk that the proposals will be dehydrated during legislative negotiations, which could generate more pressure on the financial market.
Another assessment is that the market will look for clear signs of the government’s commitment to fiscal adjustment. Measures such as prohibiting the expansion of tax benefits in the event of a primary deficit were seen as positive, but not sufficient to broadly restore credibility.
