Expectations of a lengthy wait for Brazil's flagship pension reform are prompting investors to seek more immediate results in other areas of the government's pro-business agenda.
As the initial stock market euphoria over President Jair Bolsonaro's election victory subsides, investors are clamoring for signs of concrete progress. With his proposals for an overhaul of social security still at the start of a marathon congressional debate, next week's auction of 12 airports will offer a sign of market sentiment towards the Bolsonaro administration.
"While the pension reform process is ongoing, it's essential that the government moves on with other much-needed reforms like privatizations and the improvement of business conditions," said Bernd Berg, strategist at Woodman Asset Management in Switzerland. The airport auction "gives an indication of foreign investor appetite."
The 12 airports to be auctioned on March 15, together with railroads and ports that will be sold later in the month, are valued by the government at roughly 7.6 billion reais ($2 billion). Other measures attracting attention from financial markets include a proposal to grant the central bank formal independence and a bill that would open up the public sanitation sector to more competition.
Bolsonaro took power in January amid optimism that his government would boost growth, cut debt and restore order to Brazil's fiscal accounts. Economy Minister Paulo Guedes has said that the plan to save over one trillion reais by toughening access to pension benefits is the first step in achieving those goals.
Still, securing the bill's passage in Congress will be no easy task. The Bolsonaro administration will have to work from scratch to build a base of support consisting of three-fifths of both the lower house and Senate. Negotiations with lawmakers are expected to weaken some of the bill's key points, including a minimum retirement age.
An official close to Guedes said the government should focus its legislative efforts on one measure at a time. Separately, a ministry undersecretary said the administration should consider how to keep investors interested in Brazil in the event of a prolonged pension reform debate. Both officials requested anonymity because the discussion isn't public.
"Talks involving pension reform are draining energy from other initiatives," said Ilya Gofshteyn, a strategist at Standard Chartered Bank. "Putting public accounts in order is critical, but, in the meantime, approving other less high-profile measures can improve sentiment."