By Jamie McGeever
BRASILIA (Reuters) – Brazil’s lower house of Congress is expected to vote on a landmark overhaul to the country’s pension system on Wednesday, triggering a surge across Brazilian markets on growing optimism that the bill will pass this first round of voting.
The benchmark Bovespa stock market jumped more than 1.0% to an all-time high of 105,800 and the real rose to its strongest level in four months as traders bet the long-awaited legislative hurdle will finally be scaled.
Asked about prospects for his reform bill, President Jair Bolsonaro said “Victory!” His chief of staff Onyx Lorenzoni said the government now has enough votes for approval.
Lorenzoni said the government can count on the votes of 330 lawmakers, more than the 308 needed for it to pass. He also said, all going well on Wednesday, the second round of lower house voting will take place on Friday, before Congress breaks for recess on July 18.
The reforms are key to Bolsonaro’s economic agenda as he tries to bring the country’s public finances back to health, saving the public purse around 1 trillion reais ($263 billion) over the next decade.
His economy ministry says Brazil’s growth and inflation prospects for years to come will rest on closing the huge budget gap created by the generous pension system.
After months of intense and often acrimonious political drama, and a late postponement on Tuesday due to ongoing bargaining between the government and opposition lawmakers, a positive vote appears to be within reach.
Brazilian markets reacted accordingly on Wednesday.
The Bovespa index jumped 1.2% to a new high of 105,800 points, the dollar fell 1.0% to 3.76, and interest rate futures fell across the curve <0#DIJ:>, reflecting traders’ confidence that pension reform approval will pave the way for the central bank to lower official interest rates.
“On Wednesday, we will close the first round of voting,” lower house speaker Rodrigo Maia tweeted early on Wednesday. Maia determines when a vote occurs but will only proceed when he is confident he has enough support in the house, which is comprised of representatives of more than 20 political parties.
($1 = 3.76)
(Reporting by Jamie McGeever; Editing by Bernadette Baum and David Gregorio)