Investors applauded a plan to overhaul Brazil's pension system while bracing for congressional drama that's likely to rival the longest and most intricate Netflix series.
Amid plenty of fanfare, President Jair Bolsonaro personally delivered the proposal Wednesday to Congress, after a difficult few days for his government. The plan holds out big rewards, including estimated savings of up to 1.2 trillion reais ($320 billion) in 10 years, but its potentially tortuous progress will keep investors on edge for months.
"That's a good proposal, the challenge now is to get it approved," said Joaquim Kokudai, partner at JPP Capital in Sao Paulo. "The savings figure was confirmed and that's very good, but the government's ability to negotiate is a question mark."
At stake is the sustainability of Brazil's public finances and the future of Latin America's largest economy. Financial markets will likely seesaw as odds of approval of the reform rise or fall, and the current optimism that has fueled a rally in Brazilian assets may fade depending on how much the bill gets delayed or watered down.
Doubts about Mr. Bolsonaro's ability to secure congressional backing increased in recent days after the dismissal of Secretary General Gustavo Bebianno rattled his administration. In efforts to move past the crisis, the government prepared a big push for the reform, including an advertising campaign and a nationally televised address by the president later Wednesday. Meanwhile, Economy Minister Paulo Guedes was sent to pitch the proposal to governors and other political leaders.