ETFs To Shine As Brazil Pension Bill Nears Final Approval

Brazil’s long-awaited pension reform bill was approved by a special committee in the lower House of Deputies by a 36 to 13 margin on Jul 4. This gets the pension reform bill a step closer to final approval. It is believed that the passage of the bill will provide some boost to the Brazilian economy, which is expected to face technical recession in the second quarter.

Responding to the development, the Bovespa stock market rose 1.5% on Jul 4, after a record high earlier (per a Reuters article).

Current Status of the Bill

After receiving clearance from the special committee in the lower House of Deputies, the pension reform bill will now advance for lower house plenary voting and approval before Congress goes for a recess on Jul 18. If passed here, the legislation will advance to the Senate for the final nod. The bill is expected to get approval by September. However, the pension reform bill faces the risk of modifications, the odds of which are low as key legislators have supported the bill.

Brazilian Pension Reform Bill at a Glance

The bill aims to reduce Brazil’s social security expenditure and debt burden. It is expected to result in savings of around 1 trillion reais ($264 billion) over a period of 10 years, meeting the high end of majority of the analysts’ projections. Economy Minister Paulo Guedes believes refurbishing Brazil’s social security system could result in savings of about 3 trillion reais in a span of 20 years.

Moreover, the passage of the bill is expected to encourage investments in the country as the Brazilian Government will be able to focus on broader agendas of deregulation and privatization, spurring economic growth and job creation. Moreover, central bank president Roberto Campos Neto has commented on the importance of passage of the bill, which is integral for controlling inflation.

ETFs to Shine

Against this backdrop, let’s take a look at some Brazilian ETFs which are expected to gain from the development:

iShares MSCI Brazil ETF EWZ

The fund seeks to track the investment results of the MSCI Brazil 25/50 Index. The fund has amassed $9.07 billion in its asset base and charges a fee of 59 bps a year. It has a Zacks ETF Rank of 2 (Buy) with a High risk outlook (read: 6 ETFs for June).

First Trust Brazil AlphaDEX Fund FBZ

The fund tracks the investment results that replicate the price and yield, before the fees and expenses, of the NASDAQ AlphaDEX Brazil Index. The fund has amassed $143.7 million in its asset base and charges a fee of 80 bps a year. It has a Zacks ETF Rank of 3 (Hold) with a High risk outlook (read: International ETFs Win in May).

VanEck Vectors Brazil Small-Cap ETF BRF

The fund tracks before fees and expenses, the price and yield performance of the MVIS Brazil Small-Cap Index. The fund has amassed $94.1 million in its asset base and charges a fee of 60 bps a year. It has a Zacks ETF Rank of 3 with a High risk outlook.

Franklin FTSE Brazil ETF FLBR

The fund provides investment results that closely replicate, before fees and expenses, the performance of the FTSE Brazil RIC Capped Index. The fund has amassed $22.5 million in its asset base and charges a fee of 19 bps a year. It has a Zacks ETF Rank of 2.

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