R$ 6.6 billion a year. That is the estimated cost of Brazil's shorter workweek for city governments alone, according to the National Confederation of Municipalities (CNM), roughly R$ 32 per inhabitant over twelve months. It is this kind of bill that helps explain why the end of the 6x1 schedule, in which an employee works six days and gets one day off, rattled financial markets.
According to Valor Econômico, the inflation premiums built into government bonds spiked after Congress enacted, on Friday (16), the constitutional amendment ending the six-days-on, one-day-off routine common in Brazilian retail and services. Investors read the change as one that raises corporate costs, affects employment and may push prices up, the newspaper reports. For consumers, the message is direct: a risk of high interest rates for longer on installment plans, mortgages and credit cards.
The enacted amendment guarantees two paid rest days per week with no pay cut and gradually lowers the maximum workweek from 44 to 40 hours. Within two months of publication in the Official Gazette, the cap falls to 42 hours, according to g1. It is the first change to general working-hours rules since the 1988 Constitution.
Understand: what inflation premiums are
An inflation premium is the gap between the yield on a regular government bond and the yield on a bond indexed to Brazil's official inflation index, the IPCA. That gap works as a thermometer of what the market expects for prices in the coming years. When it spikes, investors see higher inflation ahead, which tends to keep the Selic, Brazil's benchmark interest rate, at an elevated level.
The market reaction on Friday was uneven, though. The dollar closed down 0.28% at R$ 5.0728 and is down 7.58% this year, while the Ibovespa stock index rose 0.54% to 205,430 points, according to g1. In practice, stocks and the exchange rate took the day in stride, but the bond market flashed a yellow light on inflation.
The CNM figures detail the size of the adjustment: of the R$ 6.6 billion estimated for municipalities, R$ 5.14 billion would come from outsourced contracts and R$ 1.49 billion from direct hires, and, added to a second amendment enacted the same day granting special retirement to community health agents, the bill for city halls reaches R$ 11 billion a year, according to CNN Brasil. To cushion the impact on companies, Finance Minister Dario Durigan told the network the government already plans specific credit lines for the transition, focused on small and medium-sized businesses. Fears that costs will be passed on to prices are growing just as activity shows signs of heating up: the IBC-Br, the Central Bank's GDP proxy, rose 0.3% in August, its first increase in three months.