BRASILIA, Dec 5 (Reuters) - Congressional approval of Brazil’s pension system overhaul and other economic reforms is fundamental to keep inflation low and draw abundant foreign investment waiting to enter the country, central bank head Ilan Goldfajn said on Wednesday.
Goldfajn told Brazilian senators that the proposed changes to the pension system were crucial to reassure financial markets that Latin America’s largest economy has its fiscal problems under control.
“The (primary budget) deficit is in fact falling, but it is still a deficit, and we have to transform it into a surplus in time,” he said during a Senate Economic Affairs committee hearing.
Generous pensions are a major cause of Brazil’s gaping budget deficit and growing public debt, an unsustainable situation that is becoming more acute as the population ages and more people retire.
Goldfajn also said the international outlook for emerging market economies continues to be challenging, as rising interest rates in advanced economies spur investors to relocate assets.
But he reiterated that Brazil has “robust shock absorbers” that can cushion external turbulence.
Goldfajn, who was appointed to head the central bank in 2016, said he will return to his “roots” in the private sector after President-elect Jair Bolsonaro’s government is installed, but only in February or March after the Senate confirms his successor.
The next head of the central bank will be Roberto Campos, a senior executive at Banco Santander Brasil SA, who was named by future economy minister Pablo Guedes, the main economic advisor to the right-wing Bolsonaro.
Goldfajn said the central bank’s board of directors will, in principle, remain in place after the Bolsonaro government takes office on Jan. 1, ensuring a “calm transition.”
Goldfajn has encouraged Congress to pass a constitutional amendment that establishes the autonomy of the central bank, whose president would no longer be considered a cabinet minister and would have a mandate that did not coincide with the country’s presidential terms. (Reporting by Marcela Ayres Writing by Anthony Boadle Editing by Paul Simao)